Purdue News
Purdue News
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January 14, 2000 USDA crop report downright bullishWEST LAFAYETTE, Ind. – Just when corn and soybean farmers were afraid to read the monthly reports from the U.S. Department of Agriculture, they get one that makes it look like they could make some real money this year. Wednesday's (1/12) USDA Crop Production Report, which carried news of smaller supplies for corn and soybeans, brings "the first signs of relief from mounting carryover stocks," according to Purdue University agricultural economist Chris Hurt. Add to that the report's bullish jump in corn and soybean usage, and Hurt said there are the makings of a real – and sustainable– price comeback. "What we're seeing are fundamental economic factors looking up," he said. "Usage looks extremely good for corn and wheat, corn exports are up thanks to economic recovery in Asia, and yields are down. "These reports show fundamental improvements in the supply and demand conditions for grains, especially corn. Corn prices are expected to rally 8 to 10 cents on these reports, with soybeans having a 10- to 15-cent rally, and wheat 3 to 5 cents higher. More importantly, it provides evidence that low prices have helped to increase grain usage both domestically and in export markets." As a result, the USDA raised estimates for average U.S. corn prices by 10 cents, to $1.90 per bushel. Soybean carryovers dropped 30 million bushels, down to 365 million bushels, and prices went up 5 cents per bushel to a U.S. average of $4.75 for the marketing year. Wheat carryovers dropped by 55 million bushels, with prices increased by 5 cents, to $2.55. The report reduced the estimated size of the 1999 corn crop by 100 million bushels, to 9.43 billion bushels. On soybeans, a reduction of 30 million bushels, to 2.64 billion, was primarily attributed to 1-bushel-per-acre yield reduction in both Illinois and Iowa. Usage of corn and wheat was strong in the final quarter of 1999, especially for the amount of corn and wheat used as feed, and for corn exports. "Stocks of all three major grains were lower than expected, indicating that yields were lower and usage higher," Hurt said. The USDA estimate of the amount of corn to be fed from the 1999 crop rose by 100 million bushels, and projected exports were up by 50 million bushels. For wheat, feed usage rose by 50 million bushels. Winter wheat seedings also were estimated to be down 500,000 acres from last year. "Everything headed in the right direction," Hurt said. "These reductions in production and stronger usage mean that anticipated carryover stocks for all three grains went down. Expected corn carryovers from the 1999 crop dropped from nearly 2 billion bushels down to 1.7 billion bushels – a huge reduction." Hurt said the forces that will drive markets this winter and beyond are exports, weather abroad, domestic planting intentions and, as always, U.S. weather during the growing season. First, he said, exports will continue to be watched closely for signs of further strengthening. Second, weather in South America will be key to determining the direction of soybean prices: "There is currently dryness in portions of Brazil and Argentina, and lack of rainfall will stimulate price increases for soybeans and somewhat for corn." Third, by March the market will begin to focus on the 2000 U.S. planting season. "The planting intentions report released in late March is expected to show some shifting to soybeans with reductions in wheat, and modest reductions in corn acreage." Finally, Hurt said, weather prospects for the United States will become critical into the spring, given smaller stocks. If current dry conditions persist in the Midwest, they will become a growing concern due to reduced corn and soybean stocks. "This simply means that the cushion of surplus stocks is now smaller, and therefore a yield setback next summer will be more quickly reflected in prices." Hurt said grain producers can expect a trend toward higher prices for all three crops, and for corn, he said, they can expect the government's Loan Deficiency Payments to vanish. CONTACT: Hurt, (765) 494-4273, hurt@agecon.purdue.edu Compiled by Beth Forbes, (765) 494-2722, bforbes@aes.purdue.edu Purdue News Service: (765) 494-2096; purduenews@purdue.edu
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