May 15, 2000
WILL CROP SURPLUS CONTINUE?
The USDA's May Crop Production,
World Agricultural Production, and World Agricultural Supply and
Demand Estimates reports provided a lot of numbers for the market
to chew on. For the current wheat marketing year the USDA increased
the projection of U.S. domestic consumption by 5 million bushels
and lowered the projection of ending stocks (June 1) by the same
amount. Changes in world supply and demand estimates were also
For the 2000-01 marketing year,
the USDA projected a 1.1 percent reduction in world wheat production,
reflecting expectations for a larger European crop and a drop
in production in Australia, Canada, and especially China. World
stocks are expected to drop from 126 million tons at the end of
this year to 109.4 million by the end of the next marketing year.
Stocks have been smaller only once in the past 22 years (1995-96).
In the U.S., the 2000 crop is projected at 2.239 billion bushels,
63 million less than produced last year. Combined with a 50 million
bushels increase in projected exports, the smaller crop is expected
to result in a 100 million bushel reduction in year ending stocks.
The 2000-01 seasons average price is projected in a range of $2.40
to $2.90, compared to $2.50 for the current year.
For the current U.S. corn marketing
year, the USDA trimmed projected exports by 25 million bushels
and increased the projection of ending stocks by an equal amount.
Projections for the 2000-01 marketing year were for small increases
in all three major categories of consumption (feed, food and industrial,
and exports). Total use is projected at 9.55 billion bushels,
95 million above the projection for the current year.
The most interest, however, was
in the projection of potential corn crop size in 2000. As expected,
that crop size was based on March planting intentions and a normal
relationship between planted acreage and acreage harvested for
grain. The yield projection of 137 bushels per acre was a mild
surprise. That projection is about 2 bushels above the long term
linear trend yield and was justified by the perceived positive
impacts of an early planting. The projection assumes a normal
growing season, basically ignoring current moisture conditions
and the government agency forecasts of a warmer and possibly drier
than normal growing season. The projection of an above-trend yield
results in a crop projection of 9.74 billion bushels. The projection
of year ending stocks is at 1.984 billion bushels, an increase
of 200 million bushels from the projection of the current year.
The seasons average price is projected in a range of $1.60 to
On a world basis, revised projections
included a slightly larger corn production estimate for the current
year. As a result, the projection of ending stocks was increased
from 108.6 to 112.9 million tons. The USDA sees a slightly larger
world corn crop in 2000-01 due to increases in U.S., Argentine,
and European production being only partially offset by a smaller
Chinese crop. Stocks at the end of the 2000-01 marketing year
are expected to grow to 119 million tons. Stocks of all coarse
grains are projected to increase from 151.7 million tons at the
end of the current marketing year to 156.9 million tons next year.
The projection of soybean exports
during the current year was increased by 10 million bushels, while
the projection of the domestic crush was lowered 5 million bushels.
The Brazilian crop estimate was increased by about 18 million
bushels so that the South American crop, at 2.003 billion bushels,
is expected to be slightly larger than last year's harvest. World
soybean consumption, however, is running well ahead of last years
pace so that world ending stocks are expected to decline to 747
million bushels, down from 897 million at the beginning of the
For the 2000-01 U.S. soybean marketing
year, the USDA expects consumption to increase by 69 million bushels,
including a 35 million bushel increase in domestic crush and a
30 million bushel increase in exports. With an average yield of
40 bushels per acre and a 1.4 million increase in harvested acreage,
however, the USDA sees production growing by 312 million bushels.
Stocks are expected to grow from 300 million bushels at the end
of the current marketing year to 495 million by the end of the
2000-01 marketing year. The seasons average price will be near
$4.65 this year and is projected in a range of $4.00 to $5.00
for next year.
In summary, the USDA reports say
that with normal weather crop supplies will remain large and prices
low. That is obviously not new information. The market will continue
to trade weather and crop prospects. The corn and soybean crops
have been planted early and the near term forecast is for near
ideal weather in the midwest. Prices will have difficulty moving
higher if that forecast persists. Deficit soil moisture conditions
in some key growing areas and the persistent forecast of above
normal temperatures for the growing season suggest that crop size
could be uncertain well into the season.
Issued by Darrel
University of Illinois