Urbana, Illinois
July 13, 2009The July 10
USDA monthly report of U.S. and world supply and demand
projections for major crops contained a number of changes from a
month ago but generally points to abundant crop supplies for the
year ahead, said
University of
Illinois Extension ag economist Darrel Good.
"For soybeans, the USDA increased its projection of both the
domestic crush and exports during the current year by 10 million
bushels," said Darrel Good.
Those increases were offset by an increase in the projection of
imports and a smaller projection of residual use of soybeans.
Year-ending stocks are still projected at 110 million bushels,
he said.
But the projection of 2008-09 marketing year soybean exports of
1.26 billion bushels could be exceeded, he noted.
"USDA estimates place cumulative marketing year exports through
July 2, 2009, at 1.145 billion bushels. Those estimates suggest
that weekly shipments through August need to average 13.4
million bushels per week to reach the new projection of 1.26
billion bushels for the year," he said.
"However, Census Bureau estimates through May 2009 exceed USDA
estimates by 35 million bushels. If that margin persists, weekly
shipments would need to average only 9.3 million per week. If
all the bushels that were sold but not yet shipped as of July 2
are actually exported, exports for the year could be as high as
1.3 billion bushels," he said.
Exports at that level point to an unreasonably small year-ending
inventory of 70 million bushels, he noted.
"The recent drop in old crop soybean prices suggests that the
market is not concerned about old crop supplies, even with a
late-maturing crop. It now appears, however, that some
additional rationing of old crop soybean supplies is needed or
that the 2008 crop was actually larger than estimated," he said.
For the 2009-10 marketing year, updated USDA projections reflect
the larger soybean-planted acreage figure released on June 30.
With a yield of 42.6 bushels per acre, the 2009 harvest is
expected to total 3.26 billion bushels. Stocks on September 1,
2010, are projected at 250 million bushels, Good said.
"The yield projection is slightly higher than our trend
calculation of 42.2 bushels. This projection is based on weather
conditions through June, and summer weather conditions that
reflect an equal chance of the actual weather conditions of each
of the last 49 years is also 42.2 bushels. The difference of 0.4
bushels is equal to 30 million bushels," he said.
The USDA projects the 2009-10 marketing year average farm price
in a range of $8.30 to $10.30. The futures market currently
reflects an average cash price for the upcoming year of just
under $9.00, he said.
For corn, the USDA lowered the projected domestic use during the
current marketing year by 220 million bushels, with feed use and
ethanol use projections each declining by 100 million bushels,
the economist said.
"The projection of 2008-09 marketing year corn exports was
increased by 50 million bushels. Cumulative Census Bureau export
estimates through May 2009 exceeded USDA projections by about 60
million bushels. Still, the export pace will have to accelerate
to reach the projected total. Year-ending stocks are now
projected at 1.77 billion bushels," he said.
For the 2009-10 marketing year, the projection of corn
production was increased by 355 million bushels, reflecting the
larger planted acreage estimate released on June 30.
"Stocks of U.S. corn on September 1, 2010, are projected at 1.55
billion bushels, 468 million more than projected last month, but
220 million less than the projection of stocks at the beginning
of the 2009-10 marketing year," he said.
The 2009-10 marketing year average farm price of corn is
projected in a range of $3.35 to $4.15. The futures market
currently reflects an average cash price near $3.25, he noted.
"The current price of corn likely reflects a higher average
yield expectation than the 153.4 bushels projected by the USDA.
Weather conditions through June and summer weather conditions
that reflect equal chances of actual conditions in each of the
last 49 years would point to an average yield near 155 bushels.
Based on current weather forecasts and crop condition ratings,
the market is likely trading an even higher yield expectation,"
he said.
Changes in the projections for wheat point to larger year-ending
stocks, he said. The U.S. average yield projection was increased
by 0.7 bushels. When applied to the larger acreage revealed on
June 30, the yield forecast points to a crop of 2.112 billion
bushels, 96 million larger than the June forecast.
"The marketing year export projection was increased by 25
million bushels, and marketing year feed use was increased by 10
million bushels. Still, year-ending stocks are projected at an
eight-year high of 706 million bushels," Good said.
If favorable crop weather continues, some further weakness in
crop prices might be expected. The low price of wheat, along
with a weak basis and large carry in the futures market,
however, suggest retaining some ownership of the newly harvested
soft red winter wheat crop, he said.
"December 2009 corn futures are well below the price guarantee
for crop revenue products, which discourages additional new crop
sales. November 2009 soybean futures are about 30 cents above
the crop revenue insurance price guarantee," he said. |
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