June 7, 1999
USDA TO UPDATE SUPPLY AND USE
On June 11, the
USDA will release an updated winter wheat production estimate
and revised supply and demand estimates for all commodities. There
is some expectation that the winter wheat estimate may be slightly
less than the May estimate. Excellent production potential has
been threatened by persistent precipitation and delayed harvest
in some hard red winter wheat areas. Based on information provided
by private crop tours, the soft red winter crop may be larger
than estimated in May. The projection of the spring wheat crop
will be developed based on acreage expectations and trend yield
analysis. Delayed planting may result in a lower production estimate,
even though updated acreage information will not be made public
until June 30.
New crop wheat export
sales have started very slowly, but the USDA is not likely to
make significant revisions in the export projection this month.
The prospects of large quantities of poor quality wheat may result
in larger than expected feed use of wheat. The projection of year
ending (June 1, 2000) stocks is expected to be lower than the
869 million bushels projected last month.
For old crop corn,
a larger export projection is expected. Through June 3, export
inspections were 27 percent larger than inspections of a year
ago. Outstanding sales as of May 27, stood at 314 million bushels,
96 million larger than on the same date last year. Shipments and
sales are on a pace to reach 1.9 billion bushels for the year,
75 million larger than projected last month.
The market seems
to be expecting a reduction in the corn plantings estimate to
be released in the June 30 Acreage report. There is also
some concern about the possible persistence of above normal temperatures
in the corn belt and below normal precipitation in the far eastern
growing areas. For now, however, the crop condition report shows
the crop in generally good condition. The 1999 production forecast
of 9.445 billion bushels, based on planting intentions and trend
yield, is not expected to be changed this month.
If the corn export
projection for the current marketing year is increased, the projection
for the 1999-00 marketing year will also be bumped up. The potential
for economic recovery in Asia and, perhaps, smaller southern hemisphere
corn production estimates suggest that exports will continue to
recover from the poor performance in the 1997-98 marketing year.
As with wheat, it is generally expected that the projection of
year ending stocks of corn, this year and next, will be reduced
from last months projections.
For old crop soybeans,
few changes are expected in the projections of consumption. Exports
and export sales are right on pace to meet the current projection
of 770 million bushels. The domestic crush is also very near the
projected pace. The longer term question for old crop soybeans
is the size of the 1998 harvest. The large residual disappearance
to date suggests the crop was overestimated, but that conclusion
may be reversed with the September stocks estimate.
The projected size
of the 1999 soybean crop is not likely to be adjusted in this
months report, even though acreage may have exceeded March
intentions. Smaller estimates of the southern hemisphere crop
may be supportive for export prospects of U.S. soybeans next year.
However, the USDA has already penciled in a very large increase
for soybean and soybean meal exports during the 1999-00 marketing
year. The large increase is based on thoughts that South American
production will decline significantly in 2000. Unless soybean
prices are lower this fall, a decline in South American acreage
is unlikely. Adjustments in new crop projections probably will
not be made in this months report.
Prospects for corn,
soybeans, and wheat prices will continue to be influenced primarily
by weather patterns and 1999 production prospects. Soybean prices
appear to have the least potential for gain, but are responding
to early season concerns as aggressively as corn and wheat prices.
That may be because soybean prices have declined to such a low
level. As long as new crop prices are below the loan level, soybean
marketing decisions are minimal. Opportunities, however, for pricing
new crop corn may present themselves over the next two months.
The first hurdle is for December futures to break through the
spring high of $2.51.
Issued by Darrel
University of Illinois