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"With December corn futures near $2.50,
the market is fully reflecting a very large crop," said Darrel Good.
"November soybean futures at $6.40 reflect a fair amount of
skepticism that the crop will reach 2.94 billion bushels."
Good's comments came as he reviewed the
USDA's monthly update of U.S. and world crop supply and consumption
prospects released on July 12. The reports, he said, contained a
number of "tweaks" but not any significant surprises.
For corn, the USDA increased the
projection of domestic processing use of corn (other than for
ethanol) during the current year by 10 million bushels but lowered
the projection of U.S. exports by 100 million bushels, resulting in
a 90-million-bushel increase in the projection of year-ending
stocks.
For the 2004-05 marketing year, the
projection of U.S. production was increased by 210 million bushels,
reflecting the increase in acreage reported last month.
"The first objective yield and
production forecasts will be made next month," said Good. "The
projection of feed and residual use during the upcoming year was
increased by 50 million bushels, resulting in an increase of
projected year-ending stocks of 250 million bushels, to a total of
991 million. The 2004-05 marketing-year average farm price is
projected in a range of $2.30 to $2.70 -- 25 cents below the June
projection."
Worldwide, coarse grain production in
2004-05 is expected to be about 7 million tons larger than projected
in June and 39 million tons (4.4 percent) larger than the 2003-04
crop. In addition to larger crops in the United States, production
is expected to rebound in Argentina, Europe and Ukraine. World
stocks of coarse grains at the end of the 2004-05 marketing year are
expected to be smaller than stocks at the beginning of the year but
larger than projected last month.
"The projected size of the 2004 U.S.
winter wheat crop was reduced by 61 million bushels, reflecting a
257,000-acre reduction in the estimate of harvested acreage and a
1.4-bushel reduction in the forecast of average yield," said Good.
"The new projection is 237 million bushels -- 14 percent smaller
than the 2003 crop.
"Combined production of durum and other
spring wheat is forecast at 589.3 million bushels -- 6 percent
smaller than last year's crop."
World wheat production in 2004-05 is
expected to reach 598 million tons -- slightly larger than the June
forecast and 8.6 percent larger than the very small crop of a year
ago. At the projected level, the world crop would be the second
largest ever, behind the 609.3 million ton crop of 1997-98. Compared
to last year's output, production is expected to be up sharply in
the European Union, at 20.5 percent; India, 10.5 percent; Russia,
24.6 percent; and Ukraine, 317 percent. The Ukraine suffered a wheat
crop disaster last year, accounting for the huge projected increase.
[to top of second column in
this article]
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"As a result of the large world crop,
exports of U.S. wheat are expected to decline from 1.155 billion
bushels last year to 975 million in the current marketing year,"
said Good. "Still, stocks of U.S. wheat are projected to decline
from 596 million bushels on June 1, 2004, to 494 million on June 1,
2005.
"However, stocks of wheat outside the
United States are expected to grow slightly, resulting in the first
increase in world stocks in seven years. The 2004-05 U.S.
marketing-year average farm price of wheat is projected in a range
of $3.20 to $3.80 -- 5 cents lower than the June projection. Last
year's average was $3.40."
As expected, the USDA increased the
projection of the size of the domestic soybean crush during the
current marketing year. At 1.5 billion, the projection is 25 million
bushels larger than the June forecast. However, the projection of
"residual" use of soybeans was reduced to a total of only 5 million
bushels, reflecting the larger-than-expected estimate of June 1
stocks.
"Subsequent reports will have to sort
out the confusion about the size of the 2003 crop, residual use and
the actual magnitude of exports," said Good. "There is a large
difference in the Census Bureau and USDA estimates of exports to
date. The bottom line is that 2003-04 marketing-year ending stocks
are projected at only 105 million bushels -- 15 million below last
month's projection."
For the 2004-05 marketing year, U.S.
production is now anticipated to be 2.94 billion bushels -- 25
million below the June projection. The change reflects fewer planted
acres reported last month and a slight decline in the average yield
projection. The first objective yield and production forecasts will
be made next month.
"A large increase in South American
projection is still anticipated for 2004-05, allowing for a large
increase in world soybean consumption and a large increase in world
stocks," said Good. "For the 2004-05 U.S. marketing year, the USDA
projects an increase of 145 million bushels in the domestic crush, a
150-million-bushel increase in exports and a 105-million-bushel
increase in year-ending stocks.
"The
marketing-year average price is projected in a range of $5.70 to
$6.70 -- the same as projected last month and sharply lower than the
$7.55 average expected for the current year," said Good.
[University
of Illinois news release]
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