November 5, 2001
TO PROVIDE DIRECTION FOR CROP PRICES
November update of U.S. and world crop supply and consumption
prospects, to be released on November 9, will set the tone for
the corn and soybean markets at least through the end of the year.
It is generally expected that the November forecast of the 2001
U.S. corn crop will exceed the October forecast. Most of the widely
followed private forecasts show a larger crop. The USDA's November
forecast has equaled or exceeded the October forecast in 15 of
the past 20 years. Over that period, the November forecast has
exceeded the October forecast in every year that also had an unchanged
or higher forecast in October, as was the case this year.
to a larger production forecast, the market generally expects
the USDA to lower its forecast of U.S. corn exports during the
current marketing year. That expectation is based in part on the
sluggish start to the export program this year. Export inspections
during the first nine weeks of the marketing year totaled only
316 million bushels, 15 percent less than inspections during the
same period last year. Unshipped sales as of October 25 were about
12 million bushels (4 percent) smaller than on the same date last
year. The pace of export business is much slower than a year ago
for Japan, South Korea, and Egypt.
If USDA makes
the expected changes for U.S. corn production and use forecasts,
the result will be prospects for a more comfortable level of stocks
by the end of the 2001-02 marketing year. While those stocks will
likely be smaller than stocks at the beginning of the year, they
will be in line with the general level of inventory for the past
for changes in supply and consumption projections for the U.S.
soybean crop are mixed. Harvest reports reflect more variability
in late season soybean yields, resulting in mixed expectations
about the USDA's November forecast. Over the last 20 years, the
USDA's November soybean crop forecast was larger than the October
forecast 11 times and smaller 9 times. In years that the October
forecast exceeded the September forecast, as was the case this
year, the November forecast exceeded the October forecast 80 percent
of the time.
to the slow start to the U.S. corn export program, the soybean
program has started quickly, particularly the export sales program.
As of October 25, the U.S. had sold 440 million bushels of soybeans
for export. Those sales were 11 percent larger than on the same
date last year and represented 45 percent of the USDA's projected
exports for the year. Soybean export inspections were relatively
small during the first six weeks of the marketing year, but accelerated
during the three weeks ended November 1. Cumulative shipments
through November 1 were only 7 percent less than shipments of
a year ago. That difference was caused in large part to a slower
start to shipments to the European Union. Total sales to the European
Union, however, are 16 percent larger than sales of a year ago.
large level of outstanding soybean exports sales at this early
date in the marketing year, the USDA may increase the forecast
of total exports for the year. If the 2001 crop forecast is lowered,
the forecast of year ending stocks will decline, perhaps to near
the level of stocks at the beginning of the year.
USDA projection for year-ending stocks of soybeans would suggest
that the harvest low in prices has been established. For central
Illinois, the lowest daily average cash price was $3.985 established
on October 22. The average price increased by $.14 through November
2, as the average basis strengthened only $.01. The extent of
post-harvest price recovery this winter will be determined by
the rate of consumption and development of the South American
crop. After the first of the year, the market will also begin
to think about the potential size of the 2002 U.S. crop.
carryover projection for corn would suggest that the cash price
of corn may not have established a harvest or marketing year low.
The lowest average daily cash price of corn in central Illinois
so far this year was $1.795, established in mid-October. That
average daily price moved about $.05 higher by the end of October,
but was only $.01 higher on November 2, even though the average
basis had strengthened by $.05.
who have already established the loan deficiency payment (LDP))
on corn that is still owned, may want to consider establishing
some price protection. For corn on which the LDP has not been
established, producers still have a wide range of alternatives.
The large premium for January delivery still exists. The risk
for soybean prices is associated with the potential for a larger
USDA production forecast on November 9.
Issued by Darrel
University of Illinois