Urbana, Illinois
April 14, 2009
Prospects for small year-ending
stocks of soybeans and declining inventories of corn during the
2009-10 marketing year means that a generally favorable 2009
growing season will be needed to avoid rationing of use next
year, said a University of
Illinois Extension marketing specialist.
"Not much is known about growing season weather prospects
at this point," said Darrel Good. "The current LaNina is
receding and neutral LaNina/ElNino conditions are expected for
the summer months, but the correlation between those conditions
and U.S. growing-season weather is very low.
"The cool, wet start to April in some producing areas threatens
to delay the start of corn planting. However, a more favorable
weather pattern is expected to develop after this week, and
summer weather will dominate any influence of a modest delay in
corn planting."
Good's comments came as he reviewed the USDA's March 31
Prospective Plantings report which revealed producer intentions
to reduce corn acreage and to marginally increase soybean
acreage in 2009. That report pointed to the potential of tighter
supplies during the 2009-10 marketing year, and prices
strengthened modestly following the report's release.
"On April 9, the USDA released the monthly update of projections
of corn and soybean use during the current marketing year and
the projection of stocks at the end of the year," said Good.
"For soybeans the projection of the marketing year crush was
reduced by five million bushels, and the projection of marketing
year exports was increased by 25 million bushels.
"Year-ending stocks are now projected at a five-year low of 165
million bushels. That projection represents 5.5 percent of
projected use during the current marketing year. The lowest
stocks-to-use ratio in modern history was 4.5 percent in
2003-04."
For corn, the same update projected domestic processing use of
corn during the current year reduced by 10 million bushels and
the projection of feed and residual use increased by 50 million
bushels due to the larger-than-expected use during the second
quarter of the marketing year.
"Year-ending stocks are now projected at 1.7 billion bushels, or
14.1 per cent of projected use during the year," said Good.
"Projected stocks are at a three-year high and the projected
year-ending stocks-to-use ratio is well above the recent low of
9.4 percent in 2003-04."
On May 12, the USDA will release its first projections of
2009-10 marketing year supply and use, Good noted.
"Corn use during the 2009-10 marketing year may exceed the 12.04
billion bushels projected for the current year," he said. "The
increase will be led by use for ethanol. Exports may also expand
as world grain production recedes from the record level of 2008.
"The current corn harvest in Brazil and Argentina, for example,
is now estimated at 2.52 billion bushels, 650 million bushels
less than the 2008 harvest."
Domestic feed use of corn will likely continue to decline during
the year ahead as a result of the current reduction in livestock
numbers and increased competition from distillers grain. Still,
total use next year could approach 12.5 billion bushels, Good
added.
"Soybean consumption may increase modestly next year," he said.
"Some reduction in domestic and export consumption of meal will
likely keep the domestic crush relatively small, but export
demand should be strong.
"The 2009 South American soybean harvest is now estimated at
3.743 billion bushels, 515 million smaller than the 2008
harvest. For both corn and soybeans, the timing and extent of
U.S. and world economic recovery will be important in
determining the strength of demand and the level of
consumption."
Prices for the 2009 corn crop have not responded much to current
weather conditions, he noted, likely due to the experience of a
year ago when extensive delays in corn planting were followed by
an above-trend U.S. yield for corn. December 2009 corn futures
briefly traded to about $4.37 but have retreated to the $4.15 to
$4.20 area.
"Similarly, November 2009 soybean futures traded to $9.34, but
have leveled off even as prices for the 2008 crop have
strengthened," he said. "New-crop corn and soybean basis levels,
however, have strengthened modestly since early March."
Prices for the 2009 corn and soybean crops are above the spring
price guarantees for crop revenue insurance products so even
insured producers face some downside price risk.
"That risk is about 15 cents for corn and near 45 cents for
soybeans," Good said. "With so much riding on the size of the
2009 crops, prices could well trade in a wide range over the
next few months.
"Opportunities to price a portion of those crops at prices above
those currently offered will likely be available."
By Bob Sampson, University of
Illinois |
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