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"Price direction will also be provided by USDA reports to be
released on Aug.11," added Darrel Good. Good noted that corn
and soybean crop-condition ratings declined each week for the
four weeks ending on July 23. As of that date, 59 percent of the
corn crop was rated in good or excellent condition, compared
with 53 percent on the same date last year.
"Further deterioration is expected to be reflected in the
July 31 report, particularly for the Western growing areas, due
to high temperatures and continued dryness in some areas," he
said. "On July 23, 54 percent of the soybean crop was rated in
good or excellent condition, the same as last year, with further
deterioration expected to be reflected in the July 31 report."
The USDA's first forecast of corn and soybean yield and
production potential will be released on Aug.11. That forecast
will reflect farmer surveys from 33 states for corn and 29
states for soybeans, along with objective yield forecasts from
10 states for corn and 11 states for soybeans.
"With the portion of the crop in either good or excellent
condition in the upper 50 percent range for corn and the lower
50 percent range for soybeans, one would expect the August
report to show prospects for at least trend yield," said Good.
"However, the subjective nature of the crop-condition ratings
means that it is not always a good predictor of yield potential.
"The August yield forecasts will provide the benchmark for
the market to judge the potential impact of August weather on
final yield estimates. Recent high temperatures and prospects
for another round of heat in the second week of August will
stress crops in areas of low soil moisture. The amount and
coverage of precipitation in early August will be extremely
important for yield prospects."
While the price impacts will likely be small, the USDA may
also revise the forecasts of use and ending stocks for both
crops for the current marketing year. For corn, the focus is on
exports.
For the year, Good noted, the USDA currently forecasts corn
exports at 2.1 billion bushels, 286 million more than shipped
last year and the largest marketing year total since 1995-96. As
of July 27, the USDA's weekly export inspection report indicated
cumulative marketing year exports of 1.827 billion bushels.
"Through July 20, inspections trailed the export estimate in
the Export Sales report by 58.2 million bushels," said Good.
"Through May, the estimate in the Export Sales report trailed
the Census Bureau estimate by 2.9 million bushels.
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 "Exports through July 27, then, may have actually been near 1.888
billion bushels. If so, exports during the last five weeks of the
marketing year need to average 42.4 million bushels per week to
reach the USDA forecast."
With large unshipped sales and the recent average export pace of
46 million bushels per week, exports could be marginally above 2.1
billion bushels, he noted. Feed and residual use of corn may also
exceed the current USDA forecast of 6.1 billion bushels due to poor
pasture conditions in the West and high wheat prices.
"That forecast, however, is less likely to be revised in the
August report," he added.
For soybeans, the USDA currently projects the 2005-06 marketing
year crush at a record 1.72 billion bushels, 1.4 percent larger than
the crush of a year ago. Through the first 10 months of the
marketing year, the crush totaled 1.447 billion bushels, 1.5 percent
above the cumulative crush of a year earlier.
"Most of the year-over-year increase occurred in September 2005,
but the total crush in May and June 2006 was 2.9 percent larger than
that of a year earlier," Good said. "Crush during the last two
months of the marketing year needs to total only 272.6 million
bushels to reach the USDA forecast, 1.2 percent more than crushed
last year. It appears that the crush could reach 1.725 billion
bushels."
Cumulative soybean export inspections through July 27 totaled 871
million bushels. Through July 20, inspections trailed the export
estimate in the USDA Export Sales report by 5.3 million bushels.
Through May, the estimate in the Export Sales report trailed the
Census Bureau estimate by 9 million bushels.
"Exports as of July 27, then, may have actually been near 885
million bushels," said Good. "If so, exports need to average only 4
million bushels per week during the final five weeks of the year in
order to reach the USDA forecast of 905 million bushels.
"That is less than half the average of the most recent four
weeks. With large unshipped sales on the books, it appears that
exports could exceed the current USDA forecast by 10 to 20 million
bushels."
December 2006 corn futures reached a contract high of $2.88 in
late May and traded down to $2.52 last week. November 2006 soybean
futures traded to $6.40 in early July and down to $5.92 last week.
"Prices of both contracts may continue to recover from the lows
of last week under the influence of a high rate of consumption and
uncertainty about crop size," he said. "A surprise in the Aug. 11
reports or a significant decline in crop conditions may be needed,
however, for prices to trade above the recent highs."
[University
of Illinois College of Agricultural, Consumer and Environmental
Sciences news release]
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