June 14, 1999
FEW CHANGES IN SUPPLY AND USE
The USDAs monthly report of World Agricultural Supply and Demand Estimates contained
few changes from last months report. For corn, the USDA
raised the projection of exports for the current marketing year
by 50 million bushels, to a total of 1.875 billion bushels. The
increase was expected and reflects recent large weekly sales.
For the 1999-00 marketing year, the export projection was unchanged
at 1.85 billion bushels. The projected decline in exports next
year is in contrast to many private forecasts of continued recovery
in exports due to Asian economic recovery and the smaller southern
hemisphere crops just harvested. The USDA projects an increase
in production and exports from China, Argentina, and South Africa
in the year ahead. Coarse grain production in the former Soviet
Union is expected to rebound from the extremely small crop of
this past year. Production will still be quite small by historical
No changes were made in the U.S.
soybean balance sheet for either the current marketing year or
the 1999-00 marketing year. The USDA continues to project a very
large increase in exports of soybeans (21 percent) and soybean
meal (22 percent) during the year ahead. Such large increases
will probably require a decline in South American production.
Most observers do not expect a reduction in plantings at current
The estimated size of the recently
harvested South American soybean crop was reduced by a modest
11 million bushels. The decline was offset by an increase in the
estimate of the Indian crop. Foreign soybean production in 1998-99
is now estimated at just over 3 billion bushels, about 3 percent
smaller than the record crop of a year ago.
The 1999 U.S. winter wheat crop
is now estimated at 1.61 billion bushels, essentially unchanged
from the first estimate released in May and 14 percent smaller
than last years harvest. The production of hard red and
white winter wheat is expected to be 17 percent smaller, while
production of soft red winter is estimated to be only 5 percent
smaller than the 1998 crop. Compared to last months estimates,
yield prospects have improved in much of this midwest and southeast,
except for North Carolina.
Projections of consumption of U.S.
wheat during the current marketing year were unchanged from the
May projections. The expected size of the Canadian crop was reduced
by 6 percent from the May estimate. Foreign wheat production is
estimated to be about 2 percent smaller than production of a year
ago. Larger crops are expected in Argentina, Australia, India,
and the former Soviet Union. Smaller crops are projected for Canada,
the European Union, and China.
The next round of USDA reports will
include the June Hogs and Pigs report to be released on
June 25 and the Grain Stocks and Acreage reports
to be released on June 30. These reports will clarify current
supplies of old crop corn and soybeans, provide insight on domestic
feed demand, and answer some questions about planted acreage in
1999. While there is room for surprises in those reports, the
big price factor will continue to be weather and prospective yields.
For corn and soybeans, early crop
condition reports suggest the crop has started in generally very
good condition. Areas of excessive moisture, particularly in the
western corn belt, will result in some replanting and/or loss
of acreage. That is very similar to conditions experienced in
the eastern corn belt last year. Some concern is also being expressed
about tendencies for dryness in the southeast and far eastern
corn belt. The rainfall of the past weekend was beneficial for
much of the crop in those areas. The National Weather Service
6 to 10 day forecast through June 21 show prospects for normal
to above normal precipitation and below normal temperatures in
those areas. The critical period for crop development is still
to come, but for the time being conditions point to high yield
potential in 1999. As long as those conditions prevail, prices
are expected to continue to drift lower. Contract lows in December
1999 corn futures ($2.2575) and November 1999 soybean futures
($4.645) may provide only temporary support. Further price declines
now would open the door for weather rallies in July and August.
End users may want to consider some ownership with futures or
call options if prices continue to sag.
Issued by Darrel
University of Illinois