October 11, 1999
LARGER CORN CROP, SMALLER SOYBEAN
The 1999 U.S. corn crop is now estimated
at 9.467 billion bushels, 294 million bushels smaller than the
1998 harvest, but 86 million larger than estimated last month.
Compared to the September estimate, the USDA lowered the estimate
of corn acreage harvested for grain by 30,000 acres, but raised
the average yield estimate by 1.3 bushels, to 133.5 bushels per
acre. That estimate represents the third largest, behind the 138.6
bushels of 1994 and 134.4 bushels last year.
On a state-by-state basis, the average
October corn yield estimate was above the September estimate in
eight states, with the largest increase being six bushels in Illinois.
The average yield estimate was reduced in seven states, the largest
decline being 12 bushels in North Carolina.
The larger crop estimate was augmented
by a larger September 1 inventory than estimated last month. The
September 30 Grain Stocks report showed those stocks at
1.796 billion bushels, 97 million larger than expected. As a result,
the supply of corn for the 1999-00 marketing year is estimated
at 11.273 billion bushels, 184 million larger than last years
supply. Consumption of corn during the current marketing year
is projected at 9.305 billion bushels, the same as projected last
month, as a 75 million bushel increase in the export projection
was offset by an equal decline in the projection of feed and residual
use. Year ending stocks (September 1, 2000) are now projected
at a seven year high of 1.968 billion bushels. The marketing year
average price is projected in a range of $1.65 to $2.05.
For soybeans, the 1999 crop is now
estimated at 2.696 billion bushels, 82 million less than estimated
last month and 45 million bushels smaller than the 1998 crop.
The average U.S. soybean yield is estimated at a 5 year low of
37 bushels per acre, 0.9 bushels below the September estimate
and 1.9 bushels below the 1998 average. The estimate of harvested
acreage of soybeans was reduced by 475,000 acres in the October
On a state-by-state basis, the average
October soybean yield was above the September estimate in only
three states, the largest being a two bushel increase in Virginia.
The yield estimate declined in 11 states, the largest being three
bushels in North Carolina and Tennessee.
With the lower production estimate
and the lower September 1 estimate released on September 30, the
supply of soybeans for the current marketing year is estimated
at 3.049 billion bushels, still 104 million bushels larger than
last years supply. Consumption is projected to increase
by 67 million bushels (exports) leaving year ending stocks at
385 million bushels, 37 million larger than stocks at the beginning
of the year. The marketing year average price is projected in
a range of $4.75 to $5.25 per bushel.
While soybeans are still in surplus,
the surplus is not nearly as large as projected earlier in the
year. The market will now begin to focus on planting decisions
in South America. The USDA increased its projection of the 2000
Argentine harvest by 18 million bushels. The 2000 South American
harvest is now projected at 1.887 billion bushels, 3.3 percent
smaller than the 1999 harvest.
For corn, the recent supply and
demand projections suggest that it will be increasingly difficult
for corn prices to move above the Commodity Credit Corporation
loan rate. Higher prices may have to wait on a weather problem.
The premiums for deferred delivery, however, remain very large
in most markets. Establishing the loan deficiency payment (LDP)
and selling for deferred delivery still appears to be an attractive
strategy for a portion of the crop. The crop might have to be
stored unpriced into the 2000 growing season to capture a better
pricing opportunity than exists now.
For soybeans, the revised supply
and demand projections increase the likelihood that prices have
reached a seasonal low. If so, establishing the loan deficiency
payment and holding soybeans unpriced becomes a little more attractive.
This is still a risky strategy and producers will likely want
to limit the portion of the crop marketed in this fashion. At
the same time, the premiums for later delivery have increased
as harvest pressure weakens the spot basis. This development increases
the attractiveness of establishing the loan deficiency payment
now and pricing for later delivery.
For both corn and soybeans, a diversified
marketing strategy has some advantages. The mix would include
establishing the LDP and pricing some of the crop; storing a portion
of the crop unpriced, with the protection of the marketing loan
program; and storing a small portion of the crop after establishing
Issued by Darrel
University of Illinois