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"It appears that cash corn prices will
make a seasonal low during harvest and will likely be below the
Commodity Credit Corporation loan rate for a period in many areas,"
said Darrel Good. "If consumption unfolds as expected, prices should
increase modestly after harvest. The need for another large U.S.
crop in 2005 could generate additional price strength in the spring
of 2005 as the market tries to encourage more acres of corn and
worries about the weather.
"There is considerably more uncertainty
about soybean prices due to the uncertainty about Chinese demand and
South American production. If South America avoids significant
problems, soybean prices could continue to move lower into the
winter and early spring of 2005. A repeat of last year's problems,
however, would push prices higher. Ownership of soybeans beyond
harvest appears more risky than ownership of corn, suggesting that
options might be considered as a way to manage risk on a portion of
the crop."
Good's comments came as he reviewed the
corn and soybean markets in the wake of Sept. 10 USDA reports.
The 2004 U.S. corn crop is now forecast
at 10.96 billion bushels, 38 million larger than the August forecast
and 847 million bushels larger than the record crop of 2003. The
forecast reflects a national average yield of 149.4 bushels per
acre, one-half bushel above the August forecast and 7.2 bushels
above the record yield of 2003.
"As expected, the yield forecasts were
smaller in September than in August for the northern tier of states,
where the crop is late and conditions have deteriorated," said Good.
"Yield forecasts were higher for Nebraska, Iowa, Illinois, Indiana
and Ohio."
The USDA continues to forecast
consumption of U.S. corn during the 2004-05 marketing year at a
record 10.72 billion bushels. Exports are expected to show a
year-over-year increase of 215 million bushels, and corn used for
ethanol production is projected to increase by 170 million bushels.
Use at the projected level would result in year-ending stocks of 1.2
billion bushels.
The USDA projects the marketing-year
average farm price in a range of $2 to $2.40. The projected level of
year-ending stocks relative to total use points to an average price
of $2.25, based on historical relationships.
Good noted that the U.S. soybean crop
is now forecast at 2.836 billion bushels, which is 41 million
smaller than the August forecast, 418 million bushels larger than
the 2003 crop and 55 million smaller than the record crop of 2001.
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"It appears, however, that the 2003
crop was larger than the current estimate of 2.418 billion bushels,"
said Good. "That estimate could be revised in the USDA's September
grain stocks report to be released on Sept. 30."
The U.S. average soybean yield is
forecast at 38.5 bushels per acre, which is 0.6 bushels below the
August forecast, 5.1 bushels above the 2003 average and 2.9 bushels
below the 1994 record yield. September yield forecasts were below
the August forecasts in Iowa, Michigan, Minnesota, Nebraska, North
Dakota and Wisconsin. The yield forecast was larger in 13 of the 29
states for which forecasts were made. Forecasts, however, were
unchanged in Illinois, Indiana and Ohio.
"The smaller September soybean
production forecast was accompanied by a 40-million-bushel reduction
in the forecast of consumption of U.S. soybeans during the current
marketing year," said Good. "Stocks at the end of the 2004-05
marketing year are projected at 190 million bushels, the same as
projected last month. The USDA forecasts the marketing-year average
farm price in a range of $5.35 to $6.25. The projected level of
year-ending stocks relative to total use points to an average price
of $5.45, based on recent historical relationships between stocks
and average price."
Exports of U.S. soybeans during the
2004-05 marketing year are projected at 1 billion bushels. That
projection is 115 million bushels above exports for the year just
ended but is 30 million below last month's projection and 64 million
bushels below the record shipments during the 2001-02 marketing
year.
"The lower projection reflects
continued expectations for a large increase in South American
soybean production in 2005 and a slight reduction in the projections
of Chinese consumption and imports," said Good. "China is expected
to import 827 million bushels of soybeans from all sources in
2004-05. That is 206 million more than imported last year and about
equal to the record imports of two years ago but 18 million below
last month's forecast."
The 2005 South American soybean crop is
forecast at 4.15 billion bushels, which is nearly 22 percent larger
than the 2004 crop and 20 percent larger than the record crop of
2003.
"The soybean
area is expected to increase by 7.3 percent -- 10.3 percent in
Brazil -- and yields are projected at a more normal level than
experienced in 2004," said Good. "If that large crop materializes,
there will be substantial competition for U.S. soybeans and a
build-up in world stocks of soybeans by the end of the marketing
year."
[University
of Illinois news release]
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