Urbana, Illinois
May 3, 2004
University of Illinois
Extension - Weekly Outlook
The rebound in corn and soybean prices last week, following a
sharp decline from contract highs, is an indication of how much
uncertainty still remains for these crops. And prices are likely
to continue to trade in a wide range as the 2004 growing season
unfolds unless U.S. and world grain and oilseed production is
extremely large, according to University of Illinois Extension
Economist Darrel Good.
"In many years, the price prospects for corn and soybeans have
generally settled at this time in the marketing year and the
market turns to new crop prospects for price direction. This
year, however, the market must deal with considerable
uncertainty about demand as well as prospects for 2004 crops,"
said Good.
On May 10, 2004, the USDA will release its monthly update of
U.S. and world supply and consumption forecasts. That report
will contain the first projections of supply, consumption,
stocks, and average price for the 2004-05 marketing year.
"For the current corn marketing year, the projections are
expected to confirm prospects for record use and small ending
stocks," said Good. "Weekly sales of U.S. corn for export during
the current marketing year were generally large for the seven
week period ended April 22. Somewhat surprisingly, however,
shipments of U.S. corn were relatively small during the three
weeks ended on April 29. The market will be eager to see if the
USDA alters the export projection from the current 2 billion
bushel forecast."
He says domestic use of corn remains well supported by expanding
ethanol capacity and may be getting a boost from unexpectedly
high hog prices. These higher prices offset much of the impact
of higher feed prices, suggesting that hog producers may be slow
to shrink the breeding herd.
The projected size of the 2004 winter wheat crop and the impact
on wheat prices may also have implications for the feed demand
for corn during the summer months.
"With prospects for small U.S. and world grain inventories at
the end of the current marketing year, the market will be very
sensitive to 2004 growing season developments," said Good. "For
the 2004-05 U.S. corn marketing year, it is expected that the
USDA will project a large crop, but small year-ending stocks.
Good says the projections for Chinese corn production and
exports will be of major interest.
The average price projection for the 2004-05 marketing year will
likely exceed the projection for the current marketing year.
Based on the average price in mid-April, and assuming that the
2003 crop has been marketed in a typical fashion, the average
U.S. farm price received during the first eight months of the
2003-04 marketing year was only $2.37.
"With only about a quarter of the crop left to be sold, a
continuation of prices at the current level would result in an
average for the year near $2.55," said Good.
For the current U.S. soybean marketing year, the USDA may tweak
the forecasts of the size of the domestic crush and exports, but
the most interest will be in the projection of marketing-year
average farm price. This projection will give some insight into
what price levels the USDA expects to be required to stretch
available supplies until harvest.
"Based on the average price in mid-April, and assuming a typical
farm marketing pattern for the 2003 crop, the average price
received through the first eight months of the marketing year
was about $7.38. If price remains near the $10 level for selling
the last 20 percent of the crop, the average price for the year
will be near $7.90," said Good.
The size of the 2004 South American soybean crop will have
larger implications for the 2004-05 marketing year than for the
remainder of the 2003-04 marketing year. With the Brazilian
harvest nearing completion, there are still considerable
differences of opinion about the size of that crop.
"Recent estimates from Brazil differ by more than 100 million
bushels," said Good.
For the 2004-05 U.S. soybean marketing year, the USDA is
expected to forecast a large crop, reflecting an increase in
acreage and a trend yield; some increase in year ending stocks;
and a lower average farm price than projected for the current
year. Projections for the 2004-05 marketing year for the rest of
the world will not be made until July.
"A projection of increased soybean area, trend yields, and
record production in South American in 2005 would not be
surprising," said Good.
Source: Darrel Good, 217-333-4716,
d-good@uiuc.edu |
