Urbana, Illinois
September 15, 2008
Even with the USDA's recent cut in
2008 corn and soybean production forecasts, price prospects are
far from settled, said a University of
Illinois Extension marketing specialist.
"Changes in U.S. and world production prospects, energy
prices, and world economic conditions will continue to influence
prices," said Darrel Good. "A further drop in U.S. corn and
soybean production forecasts is expected in October.
"It is also encouraging that prices are holding up well in the
face of poor economic news and declining crude oil prices."
Good's comments came as he reviewed the USDA's September
forecasts of the prospective size of the 2008 U.S. corn and
soybean crops. As anticipated, both were smaller than the August
forecasts. Outside the United States, both wheat and soybean
production prospects increased while prospects for corn
deteriorated slightly.
The 2008 U.S. corn crop is now forecast at 12.072 billion
bushels, 216 smaller than the August forecast. The national
average yield is forecast at 152.7 bushels, compared to 155
bushels last month.
"The decline reflected a dry August in many areas and was well
reflected in the weekly crop condition ratings," said Good. "The
largest declines in average yield prospects occurred in Michigan
and Ohio, eight bushels each. Average yield forecasts were
lowered three bushels for Iowa and two bushels for Indiana, but
unchanged for Illinois."
On the consumption side, the USDA's World Agricultural Outlook
Board lowered the projection of feed and residual use of corn
during the current year by 100 million bushels, to 5.2 billion
bushels.
"That would be the smallest since 1995-96," he said. "The
year-over-year decline of 850 million bushels--14
percent--appears large.
"The small forecast reflects a combination of reduced livestock
output, more feeding of distillers grain, reduced feeding rates
per animal due to higher feed prices, and smaller residual use
due to a smaller crop. Residual use during the 2007-08 marketing
year appears to have been quite large, perhaps indicating the
2007 crop was overestimated."
U.S. corn exports are still expected to decline by 17.5 percent
to two billion bushels from the record level of 2007-08 despite
prospects for a smaller crop and smaller exports for Argentina.
World trade of corn is expected to decline by 425 million
bushels--11 percent--due almost entirely to smaller imports by
the European Union. Feed use of wheat in the European Union is
expected to increase by 485 million bushels from the extremely
low level of last year as production there is up by 1.02 billion
bushels.
"Even with the sharp drop in feeding and exports of U.S. corn,
stocks at the end of the year are expected to be 558 million
bushels smaller than stocks at the beginning of the year," he
said. "Ethanol use of corn is expected to increase by 1.1
billion bushels--37 percent. Current ethanol crush margins,
however, are under pressure as ethanol prices remain low
relative to unleaded gasoline prices.
"The 2008-09 marketing year average farm price of corn is
projected in a range of $5 to $6 compared to $4.20 for the year
just ended. The average price reflected by futures prices for
the next year is very close to the midpoint of that range."
The 2008 U.S. soybean crop is now estimated at 2.939 billion
bushels, 39 million smaller than the August forecast as the U.S.
average yield forecast dropped from 40.5 to 40 bushels per acre.
For the 11 objective yield states, the USDA found a relatively
low number of pods per 18 square feed compared to the September
count in recent years in Illinois and Minnesota.
"For the 29 states for which yield forecasts are made, the
forecast dropped in 14 states, increased in seven states, and
was unchanged in eight states," said Good. "The largest decline,
four bushels, came in Wisconsin. The yield forecast was
unchanged for Illinois and Iowa and was reduced three bushels
for Indiana and Ohio."
On the consumption side, the USDA increased the estimate of
exports during the year just ended by 10 million bushels, but
lowered the estimate of the domestic crush by 15 million. For
the current year, the domestic crush is expected to decline by
30 million bushels and exports are expected to decline by 155
million bushels.
Exports of soybean oil and both domestic use and exports of
soybean meal are expected to decline. The decline in exports
reflects the extremely tight supplies of U.S. soybeans and will
be accommodated by larger exports from both Brazil and Argentina
and by a small reduction in Chinese imports.
The 2009 Argentine crop is now forecast at 1.856 billion
bushels, nearly 9 percent larger than the 2008 harvest.
Production is expected to grow by about 2.5 percent in Brazil.
"Stocks of U.S. soybeans at the end of the current marketing
year are projected at a very tight 135 million bushels," Good
said. "The marketing year average price is forecast in a range
of $11.60 to $13.10, up from $10.15 for the 2007-008 marketing
year.
"Like corn, futures market prices currently reflect a price near
the mid-point of that range."
By Bob Sampson, University of
Illinois |
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