May 14, 2001
MARKET SURPRISED BY USDA CORN
The USDA's May 10 report of U.S.
and world supply and consumption prospects contained the first
projections for the 2001-02 crop year (excluding non-U.S. soybeans).
For wheat, the projections for the U.S. crop year included the
first official estimate of the potential size of the 2001 winter
wheat crop. That crop is estimated at 1.341 billion bushels, 221
million smaller than the 2000 harvest, 756 million smaller than
the record harvest of 1981, and the smallest crop since 1978.
Compared to last year, the largest declines are expected in Kansas,
Oklahoma, South Dakota, and Washington. The hard red winter wheat
crop is estimated at 718.1 million bushels, 125.6 million smaller
than the 2000 crop, 525.5 million smaller than the record crop
of 1982, and the smallest crop since 1989. The estimated size
of the winter wheat crop was smaller than expected.
Based on seeding intentions, the
spring wheat crop is forecast at 620 million bushels, about 40
million smaller than the 2000 crop. Production of all classes
of wheat is projected at 1.961 billion bushels, 262 million smaller
than the 2000 crop. As a result, U.S. inventories of wheat are
expected to decline from 829 million bushels on June 1, 2001 to
591 million on June 1, 2002.
For soybeans, the USDA projected
the 2001 harvest at a record 2.985 billion bushels, based on planting
intentions of 76.7 million acres, harvested acreage of 75.6 million,
and a trend yield of 39.5 bushels per acre. Consumption of U.S.
soybeans during the 2001-02 marketing year is expected to grow
by a very modest 15 million bushels. The slow growth is due in
part to large competing supplies in South America. As a result,
U.S. soybean inventories are expected to grow from 295 million
bushels on September 1, 2001 to 500 million bushels on September
1, 2002. The projections for the up-coming marketing year were
generally in line with expectations.
Based on planting intentions of
76.7 million acres, a projection of harvested acreage for grain
of 69.9 million acres, and a trend yield of 137 bushels per acre,
the USDA sees a 2001 U.S. corn crop of 9.575 billion bushels.
That projection is 393 million bushels smaller than the 2000 harvest
and close to the expected level. However, the USDA's projection
of U.S. corn consumption during the 2001-02 marketing year was
somewhat smaller than expected.
Food, seed, and industrial use of
corn is expected to increase by 70 million bushels, to a total
of 2.04 billion bushels. The increase presumably reflects expected
increases in ethanol production. Exports of U.S. corn are expected
to grow by a modest 25 million bushels, to a total of 1.925 billion.
Chinese exports are expected to decline by about 80 million bushels
next year, even through production is expected to increase by
790 million bushels. Shipments from Argentina are projected to
increase by 30 million bushels. Concerns by some importers about
GMO corn may also tend to keep U.S. exports at a modest level,
given generally ample supplies in other areas.
Domestic feed use of corn is expected
to decline by 125 million bushels (about 2 percent). While pork
and poultry production are expected to expand modestly during
the year ahead, fewer cattle are expected to be fed. In addition,
sorghum feeding is expected to rebound by 55 million bushels if
production rebounds from the low level of 2000. Use of U.S. corn
for all purposes during the 2001-02 marketing year is projected
at 9.665 billion bushels, 30 million less than the projection
for the current marketing year. As a result, stocks of U.S. corn
are expected to decline from 1.998 billion bushels on September
1, 2001 to 1.918 billion on September 1, 2002. The 80 million
bushel decline is considerably smaller than the 200 to 400 million
reduction projected by some private analysts.
As for prices, the USDA projected
marketing year average prices as follows: wheat, $2.75 to $3.35,
compared to $2.63 for the current year; corn, $1.65 to $2.05,
compared to $1.80 to $1.90 for the current year; and soybeans,
$3.90 to $4.50, compared to $4.40 for the current year.
December 2001 corn futures traded to a new contract low of just under $2.16
following the report. November 2001 soybean futures held just above last month's
low of $4.175. It is early in the growing season, so that significant changes
in supply and consumption projections may occur. Most interest, of course, will
be on U.S. growing conditions and yield prospects. Prices appear to be low enough
for now. In addition to technical buying, some early season weather concerns should
result in a modest recovery in prices. Until there is some indication that supplies
will be smaller, however, prices are likely to remain at the low levels experienced
since the summer of 1998. Persistence of low prices could have a direct impact
on the nature of new farm legislation.
University of Illinois