April 11, 2005
SURPLUS OF SOYBEANS DECLINING, CORN SURPLUS INCREASING
The USDA's monthly estimates of world supply
and consumption prospects for corn and soybeans confirmed
expectations. The projection of marketing year ending stocks
declined for soybeans and increased for corn.
Even though the direction of change in corn and soybean projections
were as expected, there is some lingering uncertainty about
those projections. In the case of soybeans, the USDA raised
the forecast of 2004-05 marketing year U.S. exports by 35
million bushels to a record 1.08 billion bushels. The increase
reflects the smaller estimate of the current Brazilian harvest
and the current pace of U.S. exports and export sales. The
2005 Brazilian crop is now estimated at 1.985 billion bushels,
185 million smaller than the March forecast and 330 million
smaller than the February forecast. The estimate is only 55
million larger than the 2004 crop.
The pace of exports as reported by USDA and the Census Bureau
were relatively close through the first 5 months of the marketing
year. Census data is not yet available for February and March
2005. Based on USDA data through March 31, U.S. soybean exports
totaled 909 million bushels, 21 million more than the cumulative
total in the weekly export inspections report. Cumulative
exports were 14 million larger than on the same date last
year. Shipments to China were up by 104 million bushels (34
percent) and China accounted for 45 percent of all U.S. soybean
exports. Unshipped export sales on March 1 were reported at
97 million bushels, compared to 70 million at the same time
last year. Most of the increases are also sales to China.
To reach the USDA's projection of 1.08 billion bushels for
the year, shipments need to average just under 8 million bushels
per week for the last 5 months of the marketing year. New
sales of only 74 million bushels are required.
The USDA did not acknowledge the evidence in the March Grain
Stocks report that the 2004 U.S. soybean crop was likely overestimated.
That acknowledgment could have come in the form of a larger
forecast of "residual" use of soybeans for the year.
The change in the export forecast resulted in a 35 million
bushel reduction in the projection of year ending stocks.
At 375 million bushels, that projection is 85 million less
than projected in December 2004. If the 2004 crop was smaller
than estimated, year ending stocks might be closer to 350
million bushels. Both U.S. and world stocks, however, will
still represent a surplus.
In the case of corn, the USDA reduced its forecast of consumption
in all three categories. Exports are projected at 1.8 billion,
down 50 million from the March projection. Feed and residual
use is projected at 6 billion bushels, down 75 million, and
processing use is projected at 2.76 million down 35 million
from the projection of last month. Year ending stocks are
projected at 2.215 billion bushels, or 21 percent of projected
use. That would be the largest level of ending stocks in 17
Based on the March 1 Grain Stocks report, which allowed calculation
of feed and residual use of corn during the second quarter
of the marketing year, the USDA's projection for the year
still looks high. That projection is 3.5 percent above last
year's use, while use in the first half of the year was only
up 1.5 percent. Use for the year projects to be between 5.9
and 5.95 billion bushels.
The lower projection for U.S. corn exports is the seventh
consecutive monthly reduction that totals 300 million bushels.
From September 2004 through January 2005, corn exports as
reported by the Census Bureau exceeded the USDA estimate by
31 million bushels, or 4 percent. If that pattern continued
in February and March, cumulative exports at the end of March
were likely near 1.09 billion bushels. To reach the USDA projection
of 1.8 billion, shipments during the last 5 months of the
marketing year need to average just under 33 million bushels
per week. The average weekly pace during the first 7 months
was 36 million bushels. Unshipped sales as of March 31 were
reported at 290 million bushels. To reach the USDA projection,
another 420 million bushels must be sold into the export market,
an average of about 20 million bushels per week. Weekly sales
have been less than 20 million bushels only twice in the past
7 months. It may be that exports will actually exceed the
current USDA projection. Even so, year ending stocks may be
50 million bushels larger than currently projected due to
a slow rate of domestic use.
With large inventories of both corn and soybeans, it will
be difficult for prices to move higher unless (or until?)
concerns about the 2005 crops develop.
Issued by Darrel Good
University of Illinois