December 11, 2000
USDA REPORTS WILL BE IMPORTANT
FOR WINTER CROP PRICES
Demand prospects, particularly
export demand for corn and soybeans remain uncertain. The slow
pace of corn exports during the first quarter of the marketing
year reflects continued shipments by China and reluctant buying
by Japan due to StarLink concerns. The USDA will update the
estimate of the size of the 2000 China corn crop, as well as
the marketing year projection of China and U.S. corn exports
in the monthly report released on December 12. China is currently
giving very mixed signals about the availability of corn for
exports. In addition, the timing of China's attempt to enter
the World Trade Organization may well influence its corn export
subsidy policy. A slow down in China's shipments and an increase
in Japanese buying are clearly needed soon if the U.S. has a
chance to export the 2.275 billion bushels of corn projected
last month. In addition to this week's revised projection of
exports, the weekly export inspections and export sales reports
will be monitored closely for indications that Japan has returned
to the U.S. market.
The rapid pace of soybean exports
and export sales reflect continued large purchases by China
and the restriction on meat and bone meal feeding in Europe.
The USDA is expected to increase the projection of U.S. soybean,
and perhaps soybean meal, exports in the monthly report released
on December 12. The size of the increases, however, will likely
be moderated by continued expectations of another record South
American soybean harvest in 2001.
On December 28, the USDA will
release the quarterly Hogs
and Pigs report, showing the current inventory of hogs
as well as farrowing intentions for the next six months. The
recent action in the hog market suggests the market expects
less expansion than indicated in September. The rate of expansion
will be important for domestic corn and soybean meal demand.
On January 11, the USDA will release
the final estimate of the size of the 2000 crops, an estimate
of December 1 stocks, a winter wheat seedings estimate, and
revised projection of consumption during the current marketing
year. The estimated size of the 2000 corn and soybean crops
has declined with each report since the first estimate was released
in August. Since 1975, there have been only two other years
(1984 and 1999) in which the estimated size of the U.S. soybean
crop declined each month from August through November. In both
those years, the January estimate was smaller than the November
estimate (41 million bushels in 1984 and 30 million bushels
for the 1999 crop). For corn, there have been four other years
since 1975 in which the production estimates declined each month
from August through November (1980, 1983, 1993, and 1995). The
January estimate was smaller than the November estimate in two
of those years (1980 and 1993), it was larger once (1983), and
unchanged once (1995). A slight reduction in the size of both
the corn and soybean crops appears likely this year.
The estimate of December 1 stocks
will be especially important for corn. Based on known exports
and domestic processing uses of corn, the stocks estimate will
allow the calculation of domestic feed and residual use of corn
during the first quarter of the marketing year. In combination
with the information in the December Hogs
and Pigs report, that estimate will provide the basis
for a more reliable projection of feed and residual use of corn
for the year.
The winter wheat seedings report
is expected to show a decline in acreage, partly due to unfavorable
weather in the southern plains states during the fall months.
The magnitude of the decline will be an important signal for
spring wheat producers. In addition, the location and magnitude
of the decline will have implications for likely acreage of
other spring planted crops, particularly sorghum and soybeans.
After two and one half years of
depressed corn and soybean prices, the market continues to anticipate
a break-out to higher levels. The average cash price of corn
in central Illinois moved to a marketing year high of $1.985
on December 1, while the average soybean price reached a high
of $4.965 on December 8. Those prices are $.475 and $.55, respectively,
above the lows reached early in the marketing year. While current
conditions do not point to sharply higher prices in the immediate
picture, some continued recovery in cash prices might be expected
as U.S. stock levels remain modest and world grain inventories
continue to tighten.
The extent of further price recovery
will eventually depend on prospects for the 2001 crops in the
U.S. Periods of weather and crop concerns would be expected
to push cash corn prices $.20 to $.30 above current levels.
The futures market, however, already offers a $.25 to $.30 premium
for spring delivery, depending on basis. Soybean prices could
advance by $.50 to $.75 per bushel. The futures market currently
offers about a $.20 premium for spring delivery.
THIS IS THE LAST ISSUE
OF WEEKLY OUTLOOK FOR 1999. THE NEXT RELEASE WILL BE JANUARY