June 17, 2002
GIVE CORN AND WHEAT MARKETS A FIRMER TONE
monthly reports of World Agricultural Supply and Demand Estimates
and Crop Production provided some fundamental support for corn
and wheat price prospects. In the case of wheat, the USDA now
forecasts the 2002 U.S. crop at only 1.823 billion bushels, 63
million smaller than the May forecast and 135 million smaller
than the 2001 harvest. The forecast represents the smallest crop
since 1988. U.S. stocks at the end of the 2002-03 marketing year
are projected at 555 million bushels, the smallest year-ending
inventory in 6 years.
in the rest of the world is forecast at 540.2 million tons. That
forecast is 2.6 percent larger than the 2001-02 crop, but 4.2
million tons smaller than the May forecast. Compared to last month's
forecast, smaller crops are expected in Australia, China, Eastern
Europe, and the former Soviet Union. World wheat stocks are expected
to decline for the third consecutive year. Still, wheat supplies
are expected to be large enough that consumption can continue
at a normal pace.
the major surprise in the June report was a smaller forecast of
the 2002 U.S. crop. The May forecast was based on the March Prospective
Plantings report and trend yields. This month, the USDA lowered
its expectation of corn plantings by 1 million acres due to delayed
planting in the eastern corn belt. In addition, the projected
average yield was reduced from 137.9 bushels to 135.8 bushels
to reflect the expected impact of late planting. As a result,
the 2002 crop is now forecast at 9.65 billion bushels, 285 million
smaller than the May forecast and only 143 million larger than
the 2001 crop. With expanded exports an increased domestic processing
use of corn, the smaller crop is expected to reduce stocks at
the end of the 2002-03 marketing year to 1.3 billion bushels,
the lowest level in 6 years.
month's downward revision in the projected size of the 2002 U.S.
corn crop was a friendly surprise, the market had a modest response.
The reduced forecast was logical, but there is still at lot of
uncertainty about both acreage and yield. The USDA's National
Agricultural Statistics Service will release an Acreage report
on June 28. This report will reflect an early June survey so will
not be the final word on planted acreage. However, the report
will provide a good benchmark for judging actual planted acreage.
Yield prospects will reflect weather conditions for the remainder
of the summer. The National Weather Service is projecting near
normal precipitation and temperature for the majority of the growing
season. The market will continue to take a wait and see attitude
about yield prospects.
report also contained a smaller forecast of foreign coarse grain
production. At 629 million tons, the forecast is 2.2 percent larger
than last year's crop, but 1.7 million tons smaller than the May
forecast. World coarse grain stocks at the end of the 2002-03
marketing year are forecast at 111.2 million tons, the lowest
year ending inventory in 7 years.
For the 2002-03
U.S. soybean marketing year, the USDA lowered the projection of
beginning stocks by 20 million bushels, increased the 2002 crop
projection by 20 million bushels, reduced the export projection
by 10 million, and increased the projection of year ending stocks
by 10 million bushels. The first projections for the 2002-03 marketing
year for the rest of the world will be released next month.
daily cash price of corn in central Illinois moved to the highest
level since harvest on June 13, while the highest post harvest
price of soybeans was established on June 5. It is common for
the highest cash prices of the marketing year to be established
in June. The relatively favorable near term weather outlook suggests
that prices may soften somewhat. However, it is pre-mature to
suggest that the highest prices of the year have been established.
Consumption of both corn and soybeans continue at a rapid pace
and considerable production uncertainty remains. Some sort of
averaging strategy for pricing remaining old crop inventories
still appears attractive. New crop soybean prices are still well
below the CCC loan rate. Harvest delivery prices for corn are
marginally below the loan rate in most areas. The market is offering
an average price of about $2.15 for delivery from harvest to the
summer of 2003. That is equal to the mid-point of the USDA's projection
for the marketing year average price.
Issued by Darrel
University of Illinois