April 29, 2002
FOR A SEASONAL RALLY IN CORN PRICES
cash price of soybeans in central Illinois reached the highest
level since harvest of the 2001 crop on April 24. At $4.695,
the average daily price was $.71 above the harvest low. At the
same time, cash corn prices remain mired in a remarkably narrow
trading range. At $1.865, the average daily price on April 26
was only $.07 above the harvest time low. Futures price were
only about $.03 above the contract lows established on April
12, 2002. What will it take to generate higher corn prices?
for consumption during the remainder of the 2001-02 marketing
year remain good. The hog industry continues a very slow expansion.
The USDA's April Hogs and Pigs report indicated that the March
pig crop was 1 percent larger than the crop of a year ago. Larger
numbers will provide some support for domestic feed and residual
consumption. Based on feed consumption estimates for the first
half of the marketing year, the slow expansion in hog numbers
suggests that feed and residual use for the year could exceed
the current USDA projection. Domestic use of corn should also
be supported by expanding ethanol consumption.
prospects have improved, with total commitments now exceeding
those of last year. Cumulative exports are still about 48 million
bushels (4 percent) behind the level of a year ago, but new
sales have been large over the past month. As of April 18, unshipped
sales totaled 247 million bushels, 60 million bushels larger
than unshipped sales on the same date last year. Outstanding
sales to Japan were 14 million larger, while sales to unknown
destinations were 37 million larger.
sales data would suggest that U.S. exports for the 2001-02 marketing
year might exceed last year's exports, while the USDA projects
a 10 million bushel reduction in U.S. exports. However, exports
were exceptionally large during the fourth quarter of the 2000-01
marketing year. Shipments last summer were 25 million larger
than during the fourth quarter of the previous year and were
the third largest ever. At 220 million bushels, shipments during
the final month (August 2001) of the 2000-01 marketing year
were record large for that month. The point is, it may be difficult
to repeat last year's performance during the summer of 2002.
Shipments for the next 18 weeks will have to average nearly
41 million per week to reach the USDA projection of 1.925 billion
bushels. The weekly average to date is 35 million bushels. The
weekly average during the same 18 week period last year was
36 million bushels.
It is possible
that year ending (September 1, 2002) stocks of U.S. corn will
be somewhat smaller than currently projected by the USDA. However,
prospects of slightly smaller stocks are unlikely to push corn
prices much higher if another large crop is developing in the
U.S. This year. As a result, full attention of the market is
now curing to progress of the 2002 crop. After a fairly quick
start, corn planting progress has likely slowed considerably
as a result of cool, wet weather. Additional precipitation from
eastern Iowa to the east is expected this week. Based on experience
in previous years when planting progress was delayed due to
wet weather, significant acreage shifts would not be expected
unless poor conditions persist through much of May. In general,
ample spring moisture bodes well for yield prospects if the
crop is ultimately planted in a reasonably timely fashion.
is also reacting to a new farm bill which will apparently provide
higher CCC loan rates for feed grains and a lower loan rate
for soybeans. However, the change in loan rates may be occurring
too late to have much impact on 2002 planting decisions. Many
producers have made input decisions that will limit their flexibility
in adjusting planting intentions. The bottom line is that the
prospects for increased corn acreage in 2002 are probably still
then, corn prices over the next four months will be influenced
primarily by the market's perception of 2002 U.S. yield potential.
Historically, there have been periods of sufficient concern
about production prospects to propel spot cash prices to marketing
year highs in the May through July time period. However, that
did not happen last year. The marketing year high in the spot
cash market occurred in December 2000. So far this year, the
marketing high was in December 2001. Will this be the second
consecutive year of such an unusual price pattern?