Urbana, Illinois
November 4, 2008
Larger corn and soybean production
forecasts on Nov. 10 would likely slow the recovery in corn and
soybean prices, while a surprise reduction in crop size might
provide some modest support, said a University of
Illinois Extension marketing specialist.
"A substantial recovery in corn and soybean prices,
however, likely hinges on improved demand prospects that would
come with stronger financial and energy markets," said Darrel
Good.
Good's comments came as he reviewed corn and soybean prices,
which have increased modestly from the marketing year lows of
mid to late October.
The average cash price of corn in central Illinois reached a low
of $3.33 on Oct. 24, recovered to $3.825 on Oct. 29, and stood
at $3.645 on Oct. 31. The average cash price of soybeans in the
same area reached a low of $8.055 on Oct. 15, recovered to $9.09
on Oct. 29, and stood at $8.94 on Oct. 31.
"The price of corn was 5 1/2 cents higher than on the same date
in 2007, while the price of soybeans was 79 cents lower," Good
noted.
For the most part, prices of corn and soybeans have been
influenced by developments in the financial, energy, and
currency markets, Good said.
"In addition, prices have received some direction from the pace
of exports and export sales," he said. "Corn exports and export
sales continue to be relatively weak. Total export
commitments--shipments plus outstanding sales--stood at 6.56
million bushels as of Oct. 23. Export inspections were very
small for each of the two latest reporting periods ended on Oct.
30
"New sales need to average about 24 million bushels per week in
order for marketing year exports to reach the USDA projection of
1.95 billion bushels. New sales for the last reporting week
ended Oct. 23 were only 16 million bushels. Sales are running 40
percent behind the pace of a year ago with sales to each of the
largest importers of U.S. corn lagging the pace of a year ago.
These importers include Japan, Taiwan, South Korea, and Mexico."
In contrast to corn export sales, sales of U.S. soybeans have
been large. As of Oct. 23, total export commitments stood at 524
million bushels, nearly 14 percent larger than sales of a year
ago. The USDA has projected a 12 percent year-over-year decline
in exports.
"Export inspections were especially large in the two weeks ended
on Oct. 30," he said. "Sales of U.S. soybeans to China are
running nearly 16 percent above the pace of a year ago.
"While early export sales of U.S. soybeans have exceeded
expectations, a slowdown is likely to occur as the marketing
year progresses. The USDA has projected that for the year China
will import slightly fewer soybeans from all sources than were
imported last year."
Good added that prices of corn and soybeans have also responded
to changes in the prospective size of the 2008 U.S. harvest. The
USDA's revised acreage and production forecasts released on Oct.
28 provided some modest support for prices. Those revisions
resulted in a 45 million bushel (1.5 percent) reduction in the
forecast size of the soybean harvest and a 167 million bushel
(1.4 percent) reduction in the forecast size of the corn
harvest.
"The USDA will release the final yield and production forecasts
of the season on Nov. 10," he said. "Any changes in that report
should be centered on yield forecast.
"The recent history of changes in soybean yield forecast from
October to November provides little guidance for expectations
this year."
Over the past 10 years, the November U.S. average yield forecast
has been above the October forecast five times and below five
times. From 1979 through 1997, however, the November yield
forecast exceeded the October forecast 68 percent of the time.
"The season-ending crop condition ratings may also provide some
insight into expected change in the November yield forecast," he
noted. "At the end of the 2008 season, 57 percent of the crop
was rated good or excellent, suggesting a U.S. average yield of
42.7 bushels. That is 3.2 bushels above the October forecast.
"Over the past 35 years, however, the largest increase in the
soybean yield forecast in November was 1.4 bushels (1990)."
For corn, the November U.S. average yield forecast has exceeded
the October forecast in seven of the past 10 years.
"In fact, the November forecast has exceeded the October
forecast 70 percent of the time since 1975," said Good. "The
percent of the U.S. corn crop rated good or excellent at the end
of the season has explained 88 percent of the annual variation
in the U.S. average trend-adjusted yield since 1986.
"This year, 64 percent of the crop was rated in good or
excellent condition at the end of the season, pointing to a U.S.
average corn yield of 154.4 bushels, 0.5 bushels above the
October forecast."
By Bob Sampson, University of
Illinois |
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