 
December 13, 2004
USDA TWEAKS SUPPLY AND DEMAND PROJECTIONS
The USDA's December report on World Agricultural
Supply and Demand Estimates does not include any new production
forecasts for the major U.S. crops, but it provides an opportunity
to reassess world production prospects and to update forecasts
of U.S. and world consumption.
The report released on December 10, 2004 contained relatively
minor differences from the report released in November. For
corn, the projection of corn used for ethanol during the current
marketing year was increased by 55 million bushels, but the
projected use for other food and industrial products was reduced
by 30 million bushels. In addition, the projection of U.S.
exports was reduced by 50 million bushels, to a total of 2
billion bushels. Year ending stocks are now projected at 1.844
billion bushels, 25 million larger than the November projection.
The U.S. average farm price for the current marketing year
is projected in a range of $1.70 to $2.10 per bushel, the
same as last month. Based on the average prices actually received
by farmers in September and October, the mid-month average
price in November, average monthly farmer marketing patterns,
and current futures prices for the remainder of the year,
the average price for the year would be at the very upper
end of that range.
The USDA did increase the forecast of current year corn production
for South Africa, the European Union, Mexico, Canada, and
the former Soviet Union. As a result, the projection of world
year-ending stocks of corn was increased by 3 million tons,
even thought the projection of world corn consumption was
also increased by 3 million tons. For all coarse grain, the
USDA also raised the production forecast for China, reflecting
a larger corp of sorghum.
The USDA made no changes in the supply and consumption projections
for the 2004-05 U.S. soybean marketing year. However, the
projection of average soybean oil yield per bushel of soybeans
processed was increased, more than offsetting the 100 million
pound increase in projected soybean oil exports. Year-ending
stocks of U.S. soybean oil are now projected at 1.271 billion
pounds, 84 million larger than the November projection. The
average farm price of soybeans for the 2004-05 marketing year
is projected in a range of $4.60 to $5.30,. $.10 narrower
than last month's projection of $4.55 to $5.35. Using the
same procedure as described for corn, the current market reflects
a marketing year average price near $5.25.
For the rest of the world, the USDA increased the forecast
of the size of the Chinese soybean crop by 500,000 tons, increased
the projection of world consumption during the current marketing
year by 970,000 tons, and reduced the projection of world
ending stocks by 830,000 tons. Those stocks are still expected
to be extremely large, however, totaling 60.57 million tons.
In the case of wheat, the USDA increased the projection of
U.S. exports during the current marketing year by 25 million
bushels, reduced the projection of domestic use for food items
by 10 million bushels, and reduced the projection of year-ending
stocks by 15 million bushels. The average marketing year farm
price is still projected in a range of $3.20 to $3.50 per
bushel.
For the rest of the world, the largest changes included an
1.85 million ton increase in the projected size of the Canadian
crop, and a 1 million ton reduction in the projected size
of the Australian crop. World stocks of wheat are expected
to show the first year over year increase in 5 years.
More significant changes in projections may occur in the
USDA's January report. That report will reflect the final
estimate of the size of the 2004 U.S. crops, the December
1, 2004 estimate of U.S. stocks of grains and oilseeds, additional
export history, and further development of the southern hemisphere
crops. In addition, the wheat market could be influenced by
the estimate of U.S. winter wheat seedings. All of these reports
will be released on January 12, 2005.
The soybean market appears to be the most interesting of
the major crops. To date, prices have remained much higher
than anticipated based on the large U.S. crop, prospects for
a large South American crop, and prospects for a significant
increase in U.S. and world stocks. The presence of soybean
rust, however, has been reported early in the growing season
in both Brazil and Argentina. In addition, the general thinking
is that soybean rust in the U.S. will lead to fewer acres
planted in 2005. On the demand side, China continues to buy
large quantities of U.S. soybeans. A tendency for soybean
producers to be tight holders of the stored crop has also
resulted in considerable strengthening of the basis. There
is potential for wide swings in soybean prices as the new
year unfolds.
THIS IS THE LAST ISSUE OF WEEKLY OUTLOOK FOR 2004. THE NEXT
ISSUE WILL BE ON JANUARY 3, 2005.
Issued by Darrel Good
Extension Economist
University of Illinois
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