November 13, 2000
CROP SIZE ABOUT AS EXPECTED,
The USDA reports released on November
9 confirmed the market expectations that the 2000 U.S. corn
and soybean crops were slightly smaller than estimated in October.
The U.S. corn crop is now estimated at 10.054 billion bushels,
compared to the October estimate of 10.192 billion and the August
estimate of 10.369 billion. State average yield estimates declined
by 4 bushels from October to November in Indiana, Michigan,
Minnesota, Texas, and Wisconsin. The U.S. average yield is estimated
at 137.7 bushels per acre, 1.9 bushels below the October estimate,
but 3.9 bushels above the 1999 average.
The U.S. soybean crop is now estimated
at 2.777 billion bushels, compared to the October estimate of
2.823 billion and the August estimate of 2.989 billion. The
U.S. average yield is now estimated at 38 bushels per acre,
0.7 bushel below the October estimate, but 1.4 bushels above
the 1999 average.
On the consumption side of the
equation, the USDA did not change the projection of corn use
for the current marketing year. Use for all purposes is expected
to reach a record 10.1 billion bushels. Exports are expected
to be 17.6 percent larger than exports of last year, even though
shipments to date are running 3.4 percent behind the pace of
last year and total export sales are down 11 percent. The USDA
apparently believes that Japan will continue to buy large quantities
of U.S. Corn and that South Korea will be forced to buy U.S.
corn later in the marketing year as Chinese supplies dwindle.
Year ending stocks of U.S. corn
are now projected at 1.679 billion bushels, a decline of 36
million from the level of stocks at the beginning of the year.
On a world basis, consumption of coarse grains is expected to
exceed production for the second consecutive year, reducing
year ending stocks to 15.5 percent of projected use.
The projection of consumption
of U.S. soybeans during the current year was reduced by about
20 million bushels due to expectations of larger crops in South
America. The 2001 South American harvest is now projected at
2.223 billion bushels, nearly 8 percent larger than the record
harvest of this year. Year ending stocks of soybeans in the
U.S. are projected at 350 million bushels, 62 million more than
were on hand at the beginning of the year.
After 28 months of extremely low
corn and soybean prices, the market is still looking for something
to trigger a price recovery. The newly released estimates and
projections for soybeans, however, suggest that it will be very
difficult for soybean prices to move higher in the near term.
Soybean oil prices are expected to remain especially weak due
to large world supplies of vegetable oils. Soybean price recovery
this winter would likely require some evidence that consumption
will exceed USDA projections or some threat to the South American
crop. Current conditions there are generally favorable for planting
and crop development. Longer term, prospects for the 2001 U.S.
crop will obviously be important for price prospects. There
appears to be no reason to expect a reduction in acreage next
year so that weather becomes the driving force again. Some price
recovery could occur before then if a shortage of other vegetable
oils develops. That seems unlikely at this point. There is some
risk that cash prices of soybeans could continue a modest decline,
resulting in prices below the level where many producers established
loan deficiency payments.
There is a little more support
for corn prices, as evidenced by the move above the loan rate
in many cash markets. However, exports must live up to USDA
projections if stocks are to decline as expected. Those larger
export sales, if they do occur, may be forthcoming late in the
marketing year. It will be difficult for prices to move much
higher until exports do improve. There is some risk that basis
levels could weaken after the first of the year. Traditionally,
a lot of producer selling occurs after January 1. This year,
those sales may be augmented by large contract sales that occurred
at harvest time to capture the premiums for January delivery.
In addition, country elevators will be aggressively moving corn
that has been stored on the ground.
Opinions are divided on U.S. corn
acreage prospects for 2001. The higher prices for new crop corn
in relation to the price of competing crops, including the soybean
rate, appears to offset much of the effect of higher input costs.
With a normal spring, a reduction in corn acreage would not
be expected. A modest recovery is reflected in the large carry
in the corn market, but it may take further supply concerns
to maintain that higher price level.