December 15, 2003
SMALLER CROP FORECASTS FOR ARGENTINA
The USDA's December update of projections
of U.S. and world supply and consumption of grains and oilseeds
contained some important changes from the November projections.
Changes on the supply side was dominated by Argentina, where projections
of production were lowered for wheat, corn, soybeans, and sunflowers.
Production of wheat and soybeans is still expected to exceed that
of last year, but corn and sunflower production is expected to be
smaller than the previous crops. The corn crop is projected at 530
million bushels, compared to a crop of 610 million bushels last
year. Soybean production is forecast at 1.34 billion bushels, up
from 1.3 billion produced last year.
The lower projection of wheat production in Argentina was accompanied
by a smaller projection for the crop in the European Union, but
those declines were more than offset by larger projections for Canada,
Australia, and Iran. Still, the 2003-04 world wheat crop is expected
to be 3 percent smaller than the crop of last year and 5 percent
smaller than the crop of two years ago. World wheat consumption
is expected to exceed production by nearly 1.4 billion bushels,
resulting in another decline in world stocks. For the U.S., the
USDA increased the projection of exports for the current year by
25 million bushels, to an eight year high of 1.1 billion bushels.
Through the first half of the year, U.S. wheat exports are lagging
the projected pace, but unshipped sales are large enough to make
the projection look reasonable. Year ending (June 1, 2004) U.S.
stocks of wheat are projected at 583 million bushels, compared to
stocks of 491 million at the start of the year.
The smaller soybean production forecast for Argentina was not offset
by increases for any other producing country. The Brazilian crop
is forecast at 2.2 billion bushels, about 275 million larger than
last year's crop. World production in 2003-04 is still expected
to be 100 million bushels larger than the 2002-03 crop in spite
of a 300 million bushel decline in U.S. production. In addition,
world production of other oilseeds is still expected to exceed last
year's production by 10 percent, led by a 17 percent increase in
rapeseed production. World soybean and total oilseed stocks are
expected to remain large, even with a 7 percent increase in world
The USDA made no changes in the projection of use of U.S. soybeans
during the 2003-04 marketing year. Total use cannot exceed the current
projections due to limited supplies, but some had anticipated a
large export projection and a smaller projection of domestic crush.
Through the first quarter of the year, USDA reports indicate that
U.S. soybean exports were about 7.6 percent larger than exports
during the same period last year. Exports for the year are projected
to be down 14.8 percent. The Census Bureau estimates of exports
for September and October 2003 are 15 million bushels larger than
the USDA estimate. As of December 4, exports plus unshipped sales
were still 12.6 larger than the total of a year ago, even after
two consecutive weeks of modest sales.
Due to higher than expected prices to date and indications that
soybean use is still proceeding too rapidly, the USDA increased
the forecast of the marketing year average price by $.15 per bushel.
The average is expected to fall in a range of $6.85 to $7.65. The
pace of export sales and the development of the South American crop
will determine price behavior over the next several weeks. The market
will be especially sensitive to reports that monitor the development
of Asian rust in the Brazilian crop. Some are already beating the
rust drum pretty hard.
This month's smaller corn production forecast for Argentina was
also not offset by significant changes for other countries. Corn
production outside the U.S. in 2003-04 is expected to be 900 million
bushels, or 6.6 percent, less than during 2002-03. Foreign production
of all coarse grains is expected to be down only 3.3 percent. As
a result, world coarse grain consumption is expected to expand by
nearly 2 percent. Stocks of coarse grains will be drawn down, but
consumption will apparently not be restricted.
For the 2003-04 U.S. corn marketing year, the USDA increased the
forecast of corn exports by 50 million bushels, to a three year
high of 1.925 billion bushels. That projection is 21 percent larger
than last year's exports. Shipments during the first quarter of
the year were about 20 percent larger than those of a year ago.
As of December 4, large unshipped sales put total export commitments
(shipments plus sales) 27.5 percent ahead of last year's pace. The
market will continue to watch Chinese export activity for signs
that U.S. exports will differ from the current projection. Widespread
anticipation of reduced competition from China has pushed cash corn
prices to the highest level of the marketing year. The USDA raised
its forecast of the 2003-04 U.S. average farm price by $.10 per
bushel, in a range of $2.00 to $2.40.
Issued by Darrel
University of Illinois
This is the last issue of Weekly Outlook for the year. The next
release will be on January 5, 2004.