October 16, 2000
USDA REPORTS CONTAIN SOME SURPRISES
FOR CORN AND SOYBEANS
The USDA's October reports contained
a few surprises for both corn and soybeans. The revised production
estimates, 10.19 billion bushels for corn and 2.82 billion bushels
for soybeans, were about as expected. However, projections for
consumption and year ending stocks contained some significant
changes from last month's projections.
For corn, the USDA increased the
projected feed and residual use of corn for the current marketing
year by 100 million bushels, to a total of 5.85 billion bushels.
The upward revision reflects larger than expected use last year
(based on the September stocks estimate), a slightly faster pace
of expansion of hog numbers, and a significant reduction in the
availability of sorghum. The U.S. sorghum crop is now estimated
at 465 million bushels, 51 million below the September estimate
and 130 million less than harvested last year. Feed and residual
use of sorghum is expected to be 60 million bushels less than
used last year.
The export projection for corn was
also increased by 100 million bushels, to a total of 2.275 billion
bushels. That projection is 340 million bushels larger than last
year's exports. While world trade of corn is expected to be near
the level of last year, the U.S. is expected to gain market share
from China and Argentina. Of the major corn importers, only Mexico
is expected to import significantly more corn than last year.
It was a bit of a surprise that the USDA did not lower the projection
of Chinese corn exports even though the Chinese production estimate
was reduced by nearly 400 million bushels.
With smaller estimates for September
1, 2000 stocks and the 2000 crop and larger projections of use,
the USDA's projection of year-ending stocks declined by 425 million
bushels. At 1.817 billion, year ending stocks are still expected
to be about 100 million larger than stocks at the beginning of
the year. Corn inventories in China, however, are expected to
drop from 2.08 billion bushels at the beginning of the year to
1.34 billion at the end of the year.
For soybeans, the surprises in the
projections of consumption were in the opposite direction of those
for corn. The domestic crush during the current marketing year
is now projected at 1.615 billion bushels, 15 million below last
month's projection, but 36 million more than crushed last year.
Expectations for crush are being limited by relatively weak export
demand for meal and oil.
The projection of soybean exports
was reduced to 965 million bushels, 35 million below last month's
projection and 5 million less than exported last year. World soybean
trade is expected to slow from the record pace of the 1999-00
marketing year, due primarily to smaller imports by China. Chinese
imports are projected at 266 million bushels, down from 356 million
last year. The South American harvest in 2001 is projected at
2.17 billion bushels, 65 million larger than the September projection
and 129 million larger than the record harvest of this year. Soybean
acreage is expected to be unchanged in Brazil, but is expected
to increase by 8.5 percent in Argentina. The average yield, however,
is expected to rebound to a more normal level in Brazil.
The net effect of changes in supply
estimates and consumption projections was an unchanged projection
for year ending stocks of U.S. soybeans. These stocks are projected
at 365 million bushels, compared to 288 million at the beginning
of the year.
The marketing year average farm
price of corn is expected to fall in a range of $1.65 to $2.05,
$.15 higher than last month's projection. For the year ended August
31, 2000, the average farm price was estimated at $1.80. For soybeans,
the marketing year average price is expected to fall in a range
of $4.60 to $5.20, generally above the $4.65 average of the past
For the next several weeks, prices
will be mostly influenced by harvest progress, weekly estimates
of exports, and planting progress in South America. In general,
the market expects the November production estimates to be smaller
for both corn and soybeans. The changes may not be large, but
would further reduce the projections of year ending stocks.
Corn prices have reflected the improving
fundamental market factors, while soybean prices have reflected
the deteriorating market fundamentals. December corn futures traded
to a high of $2.11 following last week's report, $.26 above the
contract low reached in August. November soybean futures traded
to a low near $4.65, $.50 below the high reached in early September.
The strength in corn prices makes corn very competitive with soybeans
in the planting decision for 2001. Harvest bids in central Illinois,
for example, reflect a soybean loan rate to corn price ratio of
less than 2.5 to 1.
Prices are now expected to trade
in a narrow range until harvest is completed. Significantly higher
prices will likely require some concern about the South American
crops, or U.S. crops next spring.
Issued by Darrel
University of Illinois