 
June 14, 2004
MIXED NEWS IN THE CORN AND SOYBEAN MARKETS
The corn and soybean markets continue to receive a mixed
bag of information. The mix of information includes U.S.
weather and crop conditions, reports on the rate of
consumption, Chinese soybean import decisions, and USDA supply
and consumption forecasts for the year ahead.
Within the past few weeks, some private weather forecasters
had predicted a period of hot, dry weather in the midwest from
mid-June to mid-July. Currently, however, the primary concern
in many areas is excessive precipitation that has resulted in
planting delays and loss of some crops to ponding and
flooding. The market always has a difficult time evaluating
the impact of excessive precipitation, recognizing that yield
potential for the majority of the acreage remains high. The
evaluation process is a little more complicated this year due
to differences of opinion about the magnitude of planted
acreage (or intentions) relative to intentions reported in
March. In general, the market has been expecting that the
USDA’s June 30 Acreage report will reveal more corn and less
soybean acreage than was indicated in the March Prospective
Plantings report. Now, uncertainty about the magnitude of
unharvested acreage will become an issue as well.
The focus on the consumption side of the market has been on
the rate of corn exports and the rate of the domestic soybean
crush. The USDA continues to project U.S. 2003-04 marketing
year corn exports at 2.05 billion bushels. To reach that
level, weekly shipments for the final 12 weeks of the year
need to average 48 million bushels. The average for the past 4
weeks was only 36 million bushels. However, export sales had
been large and it appeared that shipments might accelerate to
the needed level. For the last reporting week, however, the
USDA reported new sales of only 2 million bushels. To reach
the projection, new sales need to exceed 21 million bushels
per week. Increasingly, it appears that exports will fall
short of the USDA projection.
The need to reduce the rate of domestic soybean crush in line
with available supplies has been a focus of the soybean market
for several months. Based on the USDA projection of the crush
for the year and on Census Bureau estimates of crush through
April, the crush during the final four months of the marketing
year needs to be 23 percent less than during the same four
months last year. The Census Bureau estimate for May is not
yet available, but the National Oilseed Processors Association
reported that member crush in May was only 12 percent less
than in May 2003. If this relatively small rate of decline is
confirmed by the Census Bureau, domestic soybean supplies will
be extremely tight until the new crop harvest is available,
suggesting that the timing of the harvest will be unusually
important this year. Alternatively, the 2003 U.S. crop may
have been larger than the USDA estimate, as suggested by the
March 1 Grain Stocks report. The estimate of June 1 stocks, to
be released on June 30, will shed more light on that issue.
The impact of Chinese soybean import decisions was highlighted
last week. China continues to report the receipt of fungicide
contaminated soybeans from Brazil and has reportedly now
banned, at least temporarily, 23 trading houses from selling
soybeans to China.
Last week, the USDA released the second forecast of 2004-05
U.S. and world supply and consumption prospects for grain and
the first forecast for 2004-05 world soybean prospects. The
forecast for soybeans was released a month earlier than has
been the case in the past. World stocks of coarse grains,
including corn, are expected to be reduced again by the end of
the 2004-05 marketing year. However, all of the expected
decline is to occur in China. Stocks are expected to grow in
Europe and stabilize in most other areas. A similar forecast
has been made for wheat.
For soybeans, the USDA expects some build-up in U.S.
inventories by the end of the 2004-05 marketing year if the
2004 crop reaches its potential of 2.97 billion bushels. A
large increase in year-ending stocks is projected for South
America. That forecast is based on the expectation of a 7
percent increase in soybean area (mostly in Brazil) and a
return to more normal average yields. The 2004-05 South
American crop is initially forecast at 4.15 billion bushels,
21 percent larger than the most recent harvest and nearly 20
percent larger than the record harvest of 2002-03.
Corn prices may become a little less volatile than experienced
in recent weeks, but are still expected to trade in a wide
range. It appears that soybean prices will continue to be
quite volatile, with the most strength in old crop prices.
Issued by Darrel Good
Extension Economist
University of Illinois
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