March 15, 1999
CHANGES IN SUPPLY DEMAND ESTIMATES
GENERALLY AS EXPECTED
The USDAs March 11, World
Agricultural Supply and Demand Estimates report contained
some important changes for corn, soybeans, and wheat. The direction
of changes were well anticipated, but the magnitude of some were
larger than expected.
CORN. The projection
of corn exports for the current marketing year was increased by
75 million bushels, to a total of 1.8 billion bushels. Pre-report
guesses were for an increase in the 25 to 50 million bushel range.
The large increase reflected a number of factors, including recent
large sales, more credit for South Korea, and a reduction in the
estimated size of the South African crop. That crop is estimated
at 276 million bushels, 22 percent smaller than the February estimate,
but only 7 percent smaller than last years harvest.
To reach the projection of 1.8 billion
bushels, weekly exports will have to average 31.3 million bushels
through August. New sales will need to be near 22 million bushels
per week. The new projection appears to be a little optimistic.
Year ending stocks of corn are now projected at 1.711 billion
bushels, or 18.3 percent of projected use.
SOYBEANS. The projection
of both the domestic crush and exports of soybeans for the current
marketing year were reduced by 30 million bushels. At 780 million
bushels, projected exports are the smallest in five years. The
domestic crush is expected to decline from the previous years
crush by more than 5 million bushels for only the sixth time in
24 years. The other occurrences were small crop years. While domestic
consumption of meal and oil are on the rise, exports are expected
to be down sharply (25 percent for meal and 28 percent for oil)
from the record levels of last year.
In addition to increased production
of palm oil, U.S. soybeans are competing with large South American
supplies. The 1998 harvest there was a record 1.973 billion bushels.
The 1999 crop is now estimated to be 1.958 billion bushels, 62
million larger than last months projection. South American
exports are expected to be larger than a year ago 6 percent
for soybeans, 16 percent for soybean meal, and 11 percent for
Year ending stocks of soybeans are
now projected at 470 million bushels, the second largest ever.
At 470 million bushels, year ending stocks would represent nearly
19 percent of annual use. There is some likelihood that stocks
will exceed even the current projection.
WHEAT. The projection
of wheat exports was increased by 25 million bushels, to a total
of 1.05 billion bushels. The increase reflected recent export
activity and the beginning of the export program for Russia. The
recent talk of drought in parts of China did not cause any changes
in the Chinese production estimate this month. Year ending stocks
of wheat are not projected at 955 million bushels, or 40 percent
of projected use.
The markets showed little reaction
to the new projections and will now focus on world and U.S. weather
and additional USDA reports this month. Weather conditions in
China and South Africa will be watched for indications of further
crop deterioration. Dry conditions in Texas will be monitored
for implications for spring planted crops.
As indicated before, the March 31
Prospective Plantings report is potentially very important.
News reports indicate that Sparks Commodities most recent
forecast is for a 2.26 million acre increase in soybean acreage;
a 2.56 million acre reduction in corn acreage, a 790,000 acre
reduction in spring wheat seedings; and a 10 percent increase
in cotton acreage. Coupled with the 3.1 million acre reduction
in winter wheat seedings reported by the USDA in January, these
estimates imply a 2.8 million acre net reduction in the acreage
of these five crops. Such a reduction appears to leave some acreage
uncounted, since increased acreage of other crops is unlikely
to be as large as 2.8 million acres. If these is a surprise in
the March Prospective Plantings report it may be intentions
for more corn than the market is expecting. In addition, market
conditions after March 1 may alter producer intentions.
It seems likely that prices will
continue in a narrow range until he end of the month.
Issued by Darrel
University of Illinois