FEW CHANGES IN SUPPLY AND CONSUMPTION PROJECTIONS
last several weeks, the corn, soybean, and wheat markets have
been following some important developments and anticipating
how the USDA might alter its projections of U.S. and world supply
and consumption in the monthly report released on February 8.
For corn, the three fundamental factors being followed include:
the relatively slow pace of U.S. exports, the rapid increase
in ethanol production, and the development of the southern hemisphere
crops. For soybeans, the factors include: the rapid pace of
both domestic crush and exports of U.S. soybeans, the development
of crops in South America, and the uncertainty created by China's
policy on imports of GMO soybeans. For wheat the factors include:
condition of the U.S. winter wheat crop, a relatively slow pace
of U.S. exports, and development of crops in the southern hemisphere.
As it turns
out, the USDA made relatively few changes in projections in
the February 8 report. There were no changes in the projections
of use of U.S. corn during the 2001-02 marketing year. Year
ending stocks are still projected at 1.546 billion bushels and
the marketing year average price is expected to be in the range
of $1.85 to $2.15 per bushel. The market will continue to follow
consumption trends to determine if subsequent revisions will
be necessary. For the rest of the world, the USDA reduced the
anticipated size of the South African crop by about 20 million
bushels (5.6 percent). The change had essentially no impact
on the projections of world trade and ending stocks.
the projection of the domestic crush for the current marketing
year was increased by 5 million bushels and the projection of
exports was increased by 10 million bushels. Total consumption
is expected to be nearly 70 million bushels larger than that
of the 2000-01 marketing year. However, year ending stocks of
soybeans are expected to grow from 248 million bushels on September
1, 2001 to 270 million on September 1, 2002. The impact of the
change in Chinese import policy for GMO products to be implemented
next month will be watched closely for U.S. export implications.
oil, the larger crush projection means larger supplies. The
projection of domestic use was increased by 50 million pounds,
but the projection of exports was reduced by 100 million pounds.
Year ending (October 1, 2002) stocks are projected at 2.535
billion pounds, 105 million larger than last month's projection,
but 342 million smaller than stocks at the beginning of the
in soybean projections for the rest of the world included a
small increase in the size of the Chinese crop, an 18 million
bushel reduction in Chinese imports, and a 29 million bushel
reduction in South American exports. These changes did not alter
the overall picture of ample supplies.
case of wheat, the USDA made no changes in the projections for
consumption of U.S. wheat during the current marketing year.
Some had expected a larger export projection for soft red winter
wheat and a smaller projection for other classes, but that change
did not occur. For the rest of the world, smaller production
estimates for Argentina, the European Union, and the former
Soviet Union were offset by a larger estimate for Australia.
The projection of world consumption was increased slightly,
while the projection of ending stocks was reduced slightly.
The changes did not alter the overall fundamental picture.
February update of U.S. and world supply and consumption prospects
contained no changes that significantly altered price prospects.
In addition to the rate of consumption, the market will now
begin to turn its attention to prospects for 2002 crops in the
northern hemisphere. Prospects for U.S. corn and soybean acreage
and early season weather conditions will soon move to the forefront.
The USDA will release a Prospective Plantings report at the
end of March. The market expects an increase in U.S. corn acreage
in 2002, but does not appear to have settled on an expectation
for soybean acreage. The relatively large area of prevented
plantings in 2001 means that a more normal spring could bring
more acreage of soybeans as well. There is also still some possibility
that changes in farm policy could impact the 2002 crops, although
time is growing short. Prices for corn, soybeans, and wheat
may well continue in the recent narrow trading range for several
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