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"The USDA's monthly update on world crop supply and demand
prospects released on March 9 contained few changes from the
February report," said Darrel Good. "The quarterly Grain Stocks
and Prospective Plantings reports will set the stage for prices
during the spring months." The USDA's World Outlook Board made
no changes in March in the forecasts of consumption and ending
stocks of U.S. corn, soybeans and wheat for the current
marketing year. There was some expectation that the forecast of
the domestic soybean crush would be increased slightly based on
the pace of crush from September 2006 through January 2007.
"The forecast of the marketing year average farm price of
soybeans was increased slightly," said Good. "The midpoint of
the forecast rage is $6.30, compared to a forecast of $6.20 in
February."
For wheat, the USDA made a small reduction in the estimated
size of the crop in the European Union and a more substantial
increase in the estimated size of the crop in India. Still,
world stocks of wheat at the end of the current marketing year
will be significantly smaller than stocks at the beginning of
the year.
For corn, the USDA increased the estimated size of the
Brazilian crop by about 80 million bushels. That crop is now
forecast at almost 1.9 billion bushels, 15 percent larger than
last year's crop and 37 percent larger than the harvest in 2005.
Brazilian exports are forecast at 256 million bushels, 90
million more than exported last year. The estimated size of the
current Argentine corn crop was increased by 20 million bushels.
At 846 million bushels, the crop is expected to be 36 percent
larger than the 2006 harvest. Argentine exports are forecast at
550 million bushels, 160 million more than exported last year.
"The sharp increase in South American corn exports along with
prospects for a recovery in world wheat production and higher
corn prices point to some softness in U.S. corn exports
beginning this summer," said Good. "A slower pace of exports,
along with a further decline in domestic feed use, will make
additional quantities of corn available for ethanol production."
For soybeans, the USDA increased the estimated size of the
current Brazilian harvest by 37 million bushels. At 2.094
billion bushels, the 2007 harvest is expected to be 3.6 percent
larger than the record harvest of 2006. At 1.617 billion
bushels, the Argentine crop is expected to be 8.6 percent larger
than the 2006 crop. Production in all of South America is
forecast at 3.985 billion bushels, 233 million larger than the
2006 harvest.
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 "A continuation of relatively high soybean prices into July and
August would likely trigger a significant increase in South American
soybean acreage for harvest in 2008," said Good.
The March 1 Grain Stocks report to be released on March 30 will
provide information on the domestic rate of corn consumption during
the second quarter (December 2006-February 2007) of the marketing
year. Based on Census Bureau and USDA estimates, corn exports during
the quarter were near 528 million bushels.
"If domestic use progressed at the rate forecast by the USDA,
total domestic use during the quarter should have been near 2.41
billion bushels," said Good. "Under those circumstances, March 1
corn inventories should have been just under 6 billion bushels,
about 1 billion less than stocks of a year earlier."
Anticipating the estimate of the March 1 inventory of soybeans is
complicated by the lack of the Census Bureau estimate of the
domestic crush for February and by the inconsistent seasonal pattern
of "residual" use of soybeans, Good noted.
"Exports for the quarter were near 389 million bushels, and we
estimate the domestic crush at 454 million," he said. "If 'residual'
use during the first half of the year followed the average pattern
of the past three years, use during the second quarter was near 59
million bushels. If so, stocks on March 1 should have been near
1.795 billion bushels."
The March 30 Prospective Plantings report will likely overshadow
all other price factors into the planting season, Good said.
"Plans for a large decline in soybean acreage and a larger
increase in corn acreage are expected to be revealed in the report,"
he said. "If planned acreage of either crop is judged to be too
small or too large, the market will have three to four weeks to try
to alter production plans. Last year, for example, the March report
revealed intentions to increase soybean acreage by 4.863 million
acres and to reduce corn plantings by 3.76 million acres.
"The market judged that to be too large a shift, so that prices
adjusted. However, the price adjustment was not large enough and did
not persist long enough. Soybean planting increased by 3.49 million
acres and corn plantings declined by 3.452 million acres in 2006. If
a significant change from intentions is judged to be needed this
year, price changes will have to be more decisive."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
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