January 19, 1998
PROSPECTS FOR CORN AND
The USDAs January 12 reports
provided little friendly information for corn and soybean prices.
While the 1998 corn production estimate was reduced by 75 million
bushels, the projection of feed and residual use of corn during
the current marketing year was reduced by 150 million bushels
and the projection of processing use was reduced by 10 million
bushels. As a result, the projection of year ending stocks was
increased by 85 million bushels, to a total of 1.809 billion bushels.
Feed and residual use of corn during
the first quarter of the 1998-99 marketing year was 4.5 percent
larger than during the first quarter of last year. The USDA still
projects a 3.5 percent increase for the entire year. However,
based on a revised 1997 production estimate, last years
feed and residual use was 150 million bushels less than earlier
For soybeans, the USDA lowered the
1998 production estimate by 6 million bushels; revised the projection
of use during the current marketing year down by 20 million bushels;
and raised the projection of year ending stocks by 15 million,
to a total of 390 million bushels. The estimated size of the 1999
South American harvest was increased by 37 million bushels, to
a total of 1.84 billion bushels, only 4.6 percent smaller than
last years crop. Devaluation of the Brazilian currency will
make South American soybeans and products very competitive with
U.S. products in the world market.
Without significant problems with
the South American corn and soybean crops over the next 5 to 6
weeks, the market will continue to focus on prospects for U.S.
corn and soybean acreage in 1999. The estimate of winter wheat
seedings, released on January 12, showed a 3.1 million acre reduction
for 1999. The reduction was about 1 million larger than expected
and generated expectations about acreage of corn and soybeans
for the year ahead.
The elimination of base acres and
set-aside programs beginning with the 1996 crop makes it more
difficult to anticipate acreage of individual crops. In addition
to shifts among crops, low prices have generated some expectations
that producers will voluntarily leave some acreage idle in 1999.
In addition, wheat producers may fallow more acres. In general,
however, the magnitude of acreage that will be voluntarily idled
should be relatively low. As long as the Commodity Credit Corporation
loan rate exceeds the cash cost of growing a crop most acres will
likely be planted. Some idling of high risk acres and increased
enrollment in conservation programs, however, could reduce total
planted acreage marginally. Planted acreage figures for 1998 suggest
that western wheat producers have already put a fair amount of
fallow back in the crop rotation. Additional fallow in 1999 will
likely be small.
Winter wheat seedings in the southeast
declined by an estimated 265,000 acres. Seedings are down 935,000
acres in the corn belt, 800,000 acres in the southern plains,
210,000 acres in the Dakotas, 600,000 acres in the far west, and
400,000 acres in the northwest. The declines will likely be offset
by cotton and soybeans in the southeast; corn and soybeans in
the corn belt; cotton and feedgrains in the southern plains; and
oilseeds in the Dakotas. Higher wheat prices later might attract
some additional spring wheat acres in the Dakotas. Increased fallow
is possible for the far west. A shift away from corn to cotton
and soybeans is also expected in the southeast. Corn acreage there
totaled 3.655 million acres in 1998, up 365,000 from 1997. Corn
acreage may also be reduced in Texas.
The implication is that corn acreage
could shift from the southeast to the midwest, with perhaps a
slight decline in total acreage. Soybean acreage might increase
as much as 1.5 million acres, while total planted acreage might
decline as much as 1 million acres. A slight decline in corn acreage
in 1999 and a modest 2 to 3 percent increase in consumption, suggests
that the average corn yield in 1999 would have to equal trend
or slightly higher for the fourth consecutive year to generate
another increase in year ending stocks. With a 1.5 million acre
increase in soybeans, the U.S. average yield would have to decline
under 36.5 bushels per acre to prevent a further buildup in year
ending stocks, even with a 3 percent increase in consumption.
Acreage changes as outlined here
would be a bit friendly to new crop corn prices and negative for
soybean prices, all else remaining unchanged. The USDA will release
a Prospective Plantings report on March 31.
Issued by Darrel
University of Illinois