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"The average spot cash price of corn in
central Illinois moved to a marketing year low on Aug. 1, nearly 50
cents below the level in mid-May," said Good. "Cash soybean prices
remained above the low of October 2002 but declined by more than $1
from the market year high in mid-May. New-crop bids dropped below
the loan level."
Good's comments came as he discussed
the upcoming USDA crop production report due on Aug. 12. That report
will be the first objective yield and production estimates for the
2003 corn and soybean crops.
"As was the case last year, there is a
very wide range of opinion about potential crop size this year,
although both crops are expected to be much larger than the 2002
crops," he said. "In 2002, the August production estimates were
smaller than expected for both corn and soybeans, but both crops
turned out to be larger than the August estimates. The January 2003
estimate of the 2002 corn crop was 122 million larger than the
August estimate, while the January soybean estimate exceeded the
August estimate by 102 million bushels.
"In addition, the June 1, 2003, soybean
stocks estimate suggested that the 2002 soybean crop was even larger
than the January estimate."
Since 1980, the January soybean
estimate has been above the August estimate 13 times and below the
August estimate 10 times. For corn, the January estimate exceeded
the August estimate 14 times and was less than the August estimate
nine times.
For the 2003-04 marketing year, the
USDA has projected corn consumption at 9.95 billion bushels,
assuming abundant supplies and relatively low prices. With harvested
acreage of 72 million, the 2003 average corn yield would have to be
below 138 bushels per acre in order for consumption at the projected
level to bring year-ending stocks below one billion bushels.
"Current crop ratings suggest a yield
above 138 bushels per acre," said Good.
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For soybeans, the USDA projects use
during the year ahead at 2.784 billion bushels, assuming abundant
supplies here and in South America and relatively low prices. With
harvested acreage of 72.7 million, the 2003 average yield would have
to be below 38.2 bushels per acre in order for consumption at the
projected level to bring year-ending stocks below 150 million
bushels.
"In general, the market anticipates a
yield in excess of 38.2 bushels per acre," said Good.
Corn prices have declined enough that
there is some potential for a small countercyclical payment for the
2002 crop.
"That determination will not be made
until the average price for August is known and the USDA determines
the percentage of the crop marketed each month from September 2002
through August 2003," said Good. "Based on the average prices
reported through June, the mid-July price and the previous five-year
average monthly marketings as a percentage of the total, the
calculated weighted average price for the first 11 months of the
2002-03 marketing year is $2.32.
"That is exactly equal the price that
would result in no countercyclical payment. Actual monthly
marketings for 2002-03 may not alter this calculation much, since
monthly average prices through June were in a very narrow range. A
low average price in August, then, could trigger a small payment,
perhaps near two cents per bushel. No countercyclical payment is
anticipated for the 2002 soybean crop."
With new-crop bids slightly below the
loan rate, there is little urgency in pricing additional quantities
of new-crop corn and soybeans, Good added.
"An increase in the spreads in new-crop
corn futures and a weakening of the new-crop basis makes storage of
the 2003 corn crop more attractive," he said. "On Aug. 1, the
average harvest bid in central Illinois was 40 cents under July 2004
futures, compared to 28 cents under in mid-June. A large crop would
likely lead to additional weakening of the basis and a larger return
to storage.
"While
new-crop prices are not attractive to sellers, end-users of corn and
soybean meal have an opportunity to lock in prices at attractive
levels."
[University of Illinois news
release] |
