Urbana, Illinois
July 20, 2009Corn and
soybean markets anticipate relatively large crops and have
priced these commodities accordingly, but Darrel Good,
University of
Illinois economist, says considerable production and
price uncertainty remains.
Corn and soybean prices declined sharply during the last half of
June into early July due to surprising planted-acreage numbers
from the USDA. December 2009 corn futures declined from the
$4.70 area to under $3.30 while November 2009 soybean futures
dropped from $11.00 to a low of about $8.80.
“Improving weather conditions reduced concerns about the
potential yield impact of late planting in the eastern Corn
Belt. For corn, the larger than expected planted acreage
estimate was especially negative. Weakness in financial and
energy markets also contributed to weakness in corn and soybean
prices,” Good said.
These factors outweighed prospects for larger exports this year
and next as well as the potential for extremely small
year-ending stocks of soybeans.
Prices traded in a relatively narrow range for the past two
weeks, with strength in the financial and energy markets, along
with weakness in the U.S. dollar, providing some support.
For the next several weeks, yield and production prospects will
likely determine if a low in corn and soybean prices has been
established.
“Weather conditions have been viewed as generally favorable for
both corn and soybeans,” Good said. “Extreme heat has remained
south and west of major production areas, with the Midwest
experiencing generally below-normal temperatures in July.
Moisture concerns are minimal. Overall crop condition ratings
are relatively high.”
As of July 12, the USDA reported 71 percent of the corn crop and
66 percent of the soybean crop in either good or excellent
condition. The highest ratings are generally in the western Corn
Belt. A year ago, 64 percent of the corn crop and 59 percent of
the soybean crop was rated in good or excellent condition.
“There is an extremely high correlation between the percent of
the corn crop rated good or excellent at the end of the season
and the U.S. average trend adjusted yield,” Good said.
For corn, the crop condition model based on observations from
1986 through 2008 would project a 2009 U.S. average yield of
163.2 bushels per acre if 71 percent of the crop is rated good
or excellent at the end of the season. Each 1 percent change in
the proportion of the crop rated good or excellent would alter
the yield forecast by about 0.66 bushels per acre.
“Our crop weather model forecasts a U.S. average yield of 161.9
bushels if growing conditions through August are very favorable.
The yield expectations based on current crop ratings or the
assumption of favorable weather for the rest of the season are
well above the long-term trend calculation for 2009 of 154.9
bushels per acre,” Good said.
“For soybeans, very favorable weather through August would point
to a U.S. average yield of 44.7 bushels per acre, well above the
long-term trend calculation of 42.2 bushels per acre. For both
corn and soybeans, yield projections based on the crop weather
models assume that frost/freeze dates are not earlier than
normal,” he said.
Current acreage estimates point to prospects of large supplies
and further price weakness into harvest.
“Using USDA’s most recent projections of 2009-10 marketing year
consumption, a U.S. average corn yield of 162 bushels, for
example, would result in year-ending stocks of 2.236 billion
bushels. Use might well exceed current projections due to lower
prices under this yield scenario, but stocks could exceed 2
billion bushels,” Good said.
“For soybeans, a U.S. average yield of 44.7 bushels and use at
the level currently projected by the USDA would result in
year-ending stocks of 410 million bushels,” he said.
The USDA will release the first corn and soybean yield forecasts
of the year on August 12.
“Due to the lateness of the crop, objective yield estimates for
the eastern Corn Belt states included in that portion of the
survey will be based heavily on plant populations, suggesting
more uncertainty about yield estimates than would normally be
the case,” Good said.
Estimates of planted and harvested acreage of corn and soybeans
will be updated in October as acreage certification information
from the Farm Service Agency becomes available at that time.
Corn and soybean markets have “priced in” relatively large
crops, but considerable production and price uncertainty
remains.
“The November soybean futures are now about $.40 above the
spring price guarantee for crop revenue insurance products,
offering an opportunity for some additional pricing of the 2009
crop. In contrast, December corn futures remain well below the
crop revenue insurance price guarantee,” Good said. |
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