June 25, 2001
CORN AND SOYBEAN CONSUMPTION
For the next several weeks, the
corn and soybean markets will be reacting mostly to production
prospects in the U.S. and China. However, the rate of consumption
of the 2000 U.S. crops will continue to be of some interest, particularly
the rate of exports. There is more than one source of export estimates,
but the Census Bureau figures are the estimates carried in the
USDA's annual balance sheet of supply and use. During the marketing
year, there is often some differences in the export estimates
from the various sources for a variety of reasons.
Based on the USDA's weekly U.S.
Export Sales report, corn exports through June 14 this year totaled
1.385 billion bushels, down from 1.507 by the same date last year.
The USDA weekly export inspection figures were very close to those
totals for both years. Last year, the estimates from the Census
Bureau and the USDA were very similar. For the current year, Census
Bureau export estimates are available through April 2000. The
total exports through April were about 30 million bushels larger
than reflected in the weekly USDA reports and only 45 million
less than cumulative exports of a year ago. If that pattern continues,
exports for the year appear more likely to reach the current USDA
projection of 1.85 billion bushels than implied by the weekly
export inspection figures. The key will likely be the rate of
shipments to Japan and South Korea. The recent increase in the
pace of sales to both of those countries is encouraging.
For soybeans, the USDA's U.S. Export
Sales report and the export inspections report show shipments
as of June 14 near 906 million bushels, about 50 million more
than on the same date last year. Through April, however, the Census
Bureau estimates of cumulative soybean exports were running about
12 million bushels behind the USDA estimates. This is not an uncommon
pattern. Last year, for example, the Census Bureau estimate of
soybean exports for the entire marketing year was 17 million bushels
less than the estimate based on USDA inspection figures.
With 10 weeks left in the current
marketing year, weekly shipments of soybeans will need to average
about 9 million bushels per week to reach the current projection
of 995 million for the year, assuming the difference between USDA
and Census Bureau estimates continue through August. The magnitude
of purchases by China will be most important in judging if 995
million bushels will be reached.
As outlined in last week's issue, the rate of domestic use of
corn through May will be revealed in the June Grain Stocks report.
Prospects for feed and residual use of corn and for feed use of
soybean meal during the last quarter of the year got a little
boost from last week's USDA Cattle on Feed report. That report
showed a continued rapid placement of cattle into the feedlots.
Placements in May were 3 percent larger than in May 2000. As a
result, the June 1 feed lot inventory was 2 percent larger than
on June 1, 2000. Domestic use of corn for ethanol will apparently
proceed fairly rapidly, as a number of states are moving to subsidize
investment in production facilities.
Most observers are optimistic about
the rate of consumption of U.S. corn and soybean crops over the
next year, in spite of significant competition from South America.
Stocks are not accumulating significantly in light of such large
production levels over the past five years. Still, prices remain
at extremely low levels, with corn futures trading to new contract
lows. The market believes that recent weather conditions may have
improved overall crop condition ratings. The National Weather
Service forecasts of weather patterns through the summer are also
generally favorable for corn and soybean crop development. Prospects
for a sixth consecutive year of large crops of corn and soybeans
in the U.S. are still in place, even though some uncertainty about
the magnitude of planted acreage will persist for a while.
The sub-loan rate prices for corn and soybeans offers little incentive for
producer pricing of the new crop. However, there may be some opportunity for livestock
producers to hedge feed requirements over an extended period of time. In particular,
the inversion in the soybean meal market makes differed prices relatively attractive.
The opposite is true for corn, with a continued large carry in the market.
University of Illinois