July 14, 2003
AND GOOD DEMAND PROVIDE OPPORTUNITIES FOR PRODUCERS
a large U.S. wheat crop and prospects for record or near record large corn and
soybean crops, market attention will soon focus on demand for the 2003 crops.
The USDA's July update of world supply and demand estimates suggests that the
large crops will be met with larger consumption, although at lower average prices
than for the 2002-03 marketing years.
In the case
of wheat, the USDA now estimates the 2003 crop at 2.311 billion bushels, 135 million
larger than the June estimate and 695 million larger than the 2002 crop. Most
of the year-over- year increase in production is coming in winter wheat, reflecting
a large increase in harvested acreage and a 8.5 bushel increase in the U.S. average
yield. The final crop estimate may well be larger than the current estimate.
and residual use of wheat during the 2003-04 marketing year is expected to rebound
to a normal level of 175 million bushels. The larger than expected June 1 inventory
of wheat results in a very small estimate (102 million bushels) of feed and residual
use during the 2002-03 marketing year. U.S. wheat exports declined to the lowest
level in 30 years in 2002-03, but are expected to increase by 115 million bushels
in 200304. The projected increase reflects a much smaller crop and the expectation
of a sharp reduction in exports from Russia.
stocks of wheat are expected to increase from 492 million bushels on June 1, 2003
to 738 million by June 1, 2004. Stocks outside of the U.S. are expected to drop
sharply for the second consecutive year. Most of that decline is occurring in
China. For the year, the USDA projects the average farm price of wheat in a range
of $2.80 to $3.40. An average at the mid-point of $3.10 would result in a $.24
per bushel counter cyclical payment for the 2003 crop.
corn, the USDA has not yet made the first objective yield and production estimates
for the 2003 crop. Based on the June 30 Acreage report and crop conditions in
early July, the World Outlook Board projects the average yield at a record 142.7
bushels per acre, 4.1 bushels above the current record yield of 1994. Production
is forecast at 10.27 billion bushels, 11.4 percent larger than the 2002 crop and
2.1 percent larger than the June projection. Production of other feed grains (sorghum,
oats, and barley) is expected to be nearly 28 percent larger than in 2002.
modest price levels, consumption of U.S. corn during the 2003-04 marketing year
is expected to be 340 million bushels more than during the current year. Exports
are expected to jump by 250 million bushels as Chinese shipments decline. Food,
seed, and industrial use is expected to increase by 190 million bushels as ethanol
production expands. Feed and residual use, however, is expected to decline by
100 million bushels due to fewer hogs, increased feeding of sorghum, and increased
use of feed by-products from ethanol production.
1, 2004 corn stocks are projected at 1.339 billion bushels, 330 million more than
projected for September 1, 2003. The marketing year average price is projected
in a range of $1.90 to $2.30, compared to $2.30 projected for the current year.
An average at the mid-point of $2.10, would result in a counter-cyclical payment
of $.22 for the 2003 crop. If the large crop does materialize, cash prices for
the new crop may remain below the loan rate into harvest, resulting in some loan
For soybeans, the World Outlook
Board projects an average 2003 yield of 39.7 bushels, the same as projected last
month, and a crop of 2.885 billion bushels, 30 million larger than the June projection.
The increase reflects the larger acreage reported on June 30. The USDA projects
a 40 million bushel drop in U.S. soybean exports during the 2003-04 marketing
year as South America continues to increase market share. The 2004 South American
crop (not yet planted) is projected at 3.57 billion bushels, nearly 6 percent
larger than the record 2003 crop. Area is expected to increase by 9 percent in
Brazil and 5 percent in Argentina.
The domestic soybean
crush is projected to increase by a modest 15 million bushels during the year
ahead, reflecting weak export demand for oil and meal. With feed, seed, and residual
use at a normal level, close to 170 million bushels, total consumption of U.S.
soybeans during the year ahead is projected at 2.784 billion bushels, resulting
in a projected 105 million bushel increase in inventory. The 2003-04 marketing
year average price is projected in a range of $4.35 to $5.35, compared to $5.50
for the current year. An average at the mid-point of $4.85, would result in a
$.36 counter cyclical payment for the 2003 crop.
negative impact on producers from lower average prices projected for the 2003-04
marketing year for wheat, corn, and soybeans will likely be more than offset by
higher average yields and counter cyclical payments. In addition, stocks in the
U.S. are not expected to build to burdensome levels, providing opportunity for
higher prices in the last half of the marketing year.