 
SEPTEMBER 13, 2004
CORN AND SOYBEAN PRICES REMAIN UNDER PRESSURE
Corn futures moved to new contract lows
and soybean futures remained under pressure following the
release of USDA reports on September 10. Those reports pointed
to prospects for abundant world supplies for both commodities,
although considerable uncertainty remains, particularly for
soybeans.
The 2004 U.S. corn crop is now forecast at 10.96 billion
bushels, 38 million larger than the August forecast and 847
million bushels larger than the record crop of 2003. The forecast
reflects a national average yield of 149.4 bushels per acres,
0.5 bushel above the August forecast and 7.2 bushels above
the record yield of 2003. As expected, the yield forecasts
were smaller in September than in August for the northern
tier of states where the crop is late and conditions have
deteriorated. Yield forecasts were higher for Nebraska, Iowa,
Illinois, Indiana, and Ohio.
The USDA continues to forecast consumption of U.S. corn during
the 2004-05 marketing year at a record 10.72 billion bushels.
Exports are expected to show a year-over-year increase of
215 million bushels and corn used for ethanol production is
projected to increase by 170 million bushels. Use at the projected
level would result in year ending stocks of 1.2 billion bushels.
The USDA projects the marketing year average farm price in
a range of $2.00 to $2.40. The projected level of year ending
stocks relative to total use points to an average price of
$2.25, based on historical relationships.
The 2004 U.S. soybean crop is now forecast at 2.836 billion
bushels, 41 million smaller than the August forecast, 418
million bushels larger than the 2003 crop, and 55 million
smaller than the record crop of 2001. It appears, however,
that the 2003 crop was larger than the current estimate of
2.418 billion bushels. That estimate could be revised in the
USDA's September Grain Stocks report to be released on September
30. The U.S. average soybean yield is forecast at 38.5 bushels
per acre, 0.6 bushels below the August forecast, 5.1 bushels
above the 2003 average, and 2.9 bushels below the 1994 record
yield. September yield forecasts were below the August forecasts
in Iowa, Michigan, Minnesota, Nebraska, North Dakota, and
Wisconsin. The yield forecast was larger in 13 of the 29 states
for which forecasts were made. Forecasts, however, were unchanged
in Illinois, Indiana, and Ohio.
The smaller September soybean production forecast was accompanied
with a 40 million bushel reduction in the forecast of consumption
of U.S. soybeans during the current marketing year. Stocks
at the end of the 2004-05 marketing year are projected at
190 million bushels, the same as projected last month. The
USDA forecasts the marketing year average farm price in a
range of $5.35 to $6.25. The projected level of year ending
stocks relative to total use points to an average price of
$5.45, based on recent historical relationships between stocks
and average price.
Exports of U.S. soybeans during the 2004-05 marketing year
are projected at one billion bushels. That projection is 115
million bushels above exports for the year just ended, but
is 30 million below last month's projection and 64 million
bushels below the record shipments during the 2001-02 marketing
year. The lower projection reflects continued expectations
for a large increase in South American soybean production
in 2005 and a slight reduction in the projections of Chinese
consumption and imports. China is expected to import 827 million
bushels of soybeans from all sources in 2004-05. That is 206
million more than imported last year and about equal to the
record imports of two years ago, but 18 million below last
month's forecast.
The 2005 South American soybean crop is forecast at 4.15
billion bushels, nearly 22 percent larger than the 2004 crop
and 20 percent larger than the record crop of 2003. The soybean
area is expected to increase by 7.3 percent (10.3 percent
in Brazil) and yields are projected at a more normal level
than experienced in 2004. If that large crop materializes,
there will be substantial competition for U.S. soybeans and
a build-up in world stocks of soybeans by the end of the marketing
year.
It appears that cash corn prices will make a seasonal low
during harvest and will likely be below the CCC loan rate
for a period in many areas. If consumption unfolds as expected,
prices should increase modestly after harvest. The need for
another large U.S. crop in 2005 could generate additional
price strength in the spring of 2005 as the market tries to
encourage more acres of corn and worries about the weather.
There is considerably more uncertainty about soybean prices
due to the uncertainty about Chinese demand and South American
production. If South America avoids significant problems,
soybean prices could continue to move lower in the winter
and early spring of 2005. A repeat of last year's problems,
however, would push prices higher. Ownership of soybeans beyond
harvest appears more risky than ownership of corn, suggesting
that options might be considered as a way to manage risk on
a portion of the crop.
Issued by Darrel Good
Extension Economist
University of Illinois
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