August 16, 2004
CROP FORECASTS NOT QUITE AS EXPECTED
The USDA's August 12 Crop Production
report and the monthly estimates of world supply and demand
prospects contained a few surprises for corn, soybeans, and
wheat. The forecasts were generally negative for corn and
wheat prices and somewhat positive for soybean prices, at
least in the short run.
The 2004 U.S. corn crop is forecast at 10.923 billion bushels,
nearly 150 million bushels larger than the average trade guess
and about 800 million larger than the record harvest of 2003.
The forecast reflects a national average yield of 148.9 bushels,
6.7 bushels above last year's record yield. The U.S. average
yield has been at or above trend value in 8 of the past 9
The USDA increased the projection of the 2004 Chinese corn
crop by nearly 200 million bushels, to a total of 4.7 billion
bushels.. That forecast is 165 million bushels larger than
the estimate of the 2003 harvest. Still, the USDA sees Chinese
corn exports declining from 315 million bushels this year
to 160 million in the coming year. Exports of U.S. corn are
expected to increase from 1.925 billion this year to 2.1 billion
next year, about offsetting the decline in Chinese exports.
Domestic use of corn is expected to increase by 245 million
bushels (3 percent) during the upcoming year, including an
increase of 170 million bushels in the amount of corn used
for ethanol production. Use of U.S. corn for all purposes
during the 2004-05 marketing year is projected at 10.72 billion
bushels, an increase of 420 million bushels from the record
use during the current marketing year. Year ending stocks
of corn are projected at 1.132 billion bushels, or 10.6 percent
of consumption, suggesting a 2004-05 marketing year average
farm price of $2.28 per bushel. The USDA projects that price
in a range of $2.05 to $2.45 and the market is currently reflecting
an average of $2.23 for the year ahead. Marketing year lows
in cash prices are expected to occur in the harvest window.
The 2004 U.S. wheat crop is estimated at 2.123 billion bushels,
64 million larger than the July forecast, reflecting a combination
of a lower acreage and a higher yield forecast. The USDA also
lowered the projection of 2004-05 marketing year wheat exports
to 950 million bushels, down 25 million from last month's
projection, and 209 million less than exported in 2003-04.
The pace of U.S. wheat exports is currently well above that
of a year ago. Export inspections during the first 10 weeks
of the marketing year are up 10 percent from inspections of
a year ago and total commitments as of August 5 were 18 percent
larger than on the same date last year. The pace of exports
is apparently expected to slow significantly from the current
pace in the face of much larger wheat crops in the rest of
the world. Foreign production in 2004-05 is expected to be
up 13 percent, led by much larger crops in Europe and India
and a modest increase in China. Even though the U.S. wheat
crop is 214 million bushels smaller than the 2003 crops, year
ending stocks are expected to be slightly larger than stocks
at the start of the year on June 1, 2004. The USDA projects
the marketing year average price in a range of $2.9,5 to $3.55,
compared to the average of $3.40 for the 2003-04 marketing
The 2004 U.S. soybean crop is projected at 2.877 billion
bushels, 459 million larger than the small crop of 2003, but
about 90 million bushels less than the average trade guess.
The U.S. average yield is projected at 39.1 bushels, 5.7 bushels
above the poor performance of last year, but below the 40-plus
bushels generally expected. Recent cool weather in most growing
areas, and the later maturing crops in northern growing areas,
suggests that considerable uncertainty about the actual size
of the 2004 crop remains.
The USDA also repeated the forecast of a 7 percent increase
in South American soybean acreage and a 21 percent increase
in South American soybean production in 2004-05. A 9 percent
larger crop is also projected for China. Even with these increases,
the USDA expects U.S. soybean exports to increase by 40 million
bushels during the year ahead, to a total of 1.03 billion.
China is expected to import, from all sources, 772 million
bushels of soybeans during the upcoming marketing year. That
projection is 37 million smaller than the last months projection,
but 224 million larger than imports of the current year and
58 million larger than record imports of 2 years ago.
The domestic crush of soybeans is projected to increase by
110 million bushels from the low level of the current year.
Use for all purposes is projected at 2.798 billion bushels,
leaving year-end stocks of 190 million bushels, for a stocks-to-use
ratio of 6.8 percent. That ratio suggests a 2004-05 marketing
year average farm price of about $5.85. The USDA projects
that price in a range of $5.40 to $6.40 and the market is
currently reflecting an average of about $5.74. The pattern
of cash prices will be influenced by subsequent U.S. crop
forecasts and by South American crop prospects.
Issued by Darrel Good
University of Illinois