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"I expect this volatile pattern to
continue," said Darrel Good, U of I Extension economist.
On the supply side of the equation for corn, Good says the market
will closely monitor weather, weather forecasts and the USDA's
weekly report of crop progress and crop conditions.
"In general, the 2004 planting season
started early and has progressed rapidly. Forecasts by the National
Weather Service for May through July paint a picture of generally
favorable prospects for the corn crop. In addition to progress of
the crop, the market will continue to speculate about the magnitude
of planted acreage," he said.
Rapid planting progress has led to
speculation that corn acreage will exceed March intentions. Some
report expectations that acreage will exceed intentions by 2 million
to 3 million acres.
"The only increase in corn acreage from
March intentions to the final acreage estimates since 1996 was in
2000. The increase totaled 1.67 million acres and was fully
reflected in the USDA's June acreage report. In fact, 2000 was the
only year with a significant increase in corn acreage from March
intentions since 1988. Small increases occurred in 1992 and 1994.
The market may be expecting too large a change in corn acreage in
2004," said Good.
On the demand side, the pace of exports
and export sales will be the primary information available to the
market between now and the release of the June 1 grain stocks report
on June 30.
As of April 15, accumulated exports
since Sept. 1, 2003, totaled 1.205 billion bushels, according to the
USDA export sales report. That's 21 percent larger than shipments
during the same period last year. In addition, unshipped sales as of
April 15 totaled 380 million bushels, 87 percent larger than
outstanding sales of a year earlier.
"Export commitments, which is shipments
plus sales, were 32 percent larger than commitments of a year ago.
For the year, the USDA has projected a 26 percent increase in
exports. Shipments for the final 20 weeks of the marketing year will
need to average nearly 41 million bushels per week to reach the
2-billion-bushel projection. Shipments have averaged only 35 million
per week over the past four weeks and 38 million bushels per week
over the past eight weeks. New sales need to average only about 22
million bushels per week to reach the 2-billion-bushel sales level,"
said Good.
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article]
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For soybean demand, the market will
focus primarily on the pace of the domestic crush, the magnitude of
meal and oil imports, and estimates of the size of the South
American crop.
"The needed adjustment in the pace of
U.S. soybean exports and export sales has been made. The domestic
market will not ‘run out’ of soybeans, but the pace of use does have
to slow considerably," said Good.
Good asks: Have end users made the
necessary adjustments or will higher prices be required to stretch
available supplies?
"Market opinion is divided, but recent
price behavior suggests that prospects for reduced consumption,
increased imports and early harvest may be sufficient to meet needs
without sharply higher prices. The size of the South American crop
is more important for prospective demand for the 2004 U.S. crop.
Export sales of the 2004 crop are record large. Two-thirds of those
sales are to China, and 20 percent are to 'unknown' destinations
that likely include China," he said.
On the supply side, the market will
follow the progress of the 2004 U.S. crop, as well as weather
forecasts and weekly reports of crop conditions.
"There is some expectation that actual
plantings will be smaller than March intentions. However, the switch
to corn may be small and mostly offset by switching some intended
cotton acreage to soybeans. The potential is for a large 2004 U.S.
harvest and increased acreage in South America. Trend yields in both
the U.S. and South America in the year ahead would result in an
abundance of soybeans," said Good.
Good adds that to date the 2003-04
soybean marketing year has most resembled that of 1976-77, when the
small crop of 1976 was recognized late and the rate of consumption
did not slow until the middle of the marketing year. July 1977
futures peaked at $10.64 in late April 1977. July 2004 futures
peaked at $10.64 in early April 2004.
"The sharp,
rapid price decline of the summer of 1977 is not expected to be
repeated in 2004, but trend yields would result in lower prices by
harvest. Corn prices are expected to remain well-supported, even
with good yield prospects. The June 30 acreage report will be
important," he said.
[University
of Illinois news release]
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