Purdue News
Purdue News
January 17, 1997
The report pegged the 1996 soybean crop at 2.38 billion bushels -- about 20 million bushels lower than its earlier estimate and about 30 million bushels lower than trade estimates. The net effect will be soybean stocks of 155 million bushels carried into the next marketing year -- significantly lower than the previous estimate of 180 million bushels.
The USDA's corn production figures were bullish, too. Final figures show a 9.29-billion-bushel crop -- 28 million bushels lower than an earlier estimate, and about 20 million bushels below traders' estimates. The 960-million-bushel stock carryout is much lower than the earlier 1.16-billion-bushel estimate, primarily because of more corn being used as animal feed.
Ohio State University agricultural economist Allan Lines said the report is welcome news to farmers who were expecting lower net farm incomes this year because of lower grain prices. The report projects a 20-cents-per-bushel increase for soybeans, to an average price of $6.85. Corn prices are projected to increase 5 cents to an average $2.70 per bushel.
"Farm income will come back some, but at this point it's hard to say by how much," Lines said.
Purdue University Cooperative Extension agricultural economist Chris Hurt is allowing for a significant rise in prices. "Soybean prices will move sharply higher with this information," he said. "How much higher will depend heavily on weather in South America. The USDA continues to expect a record crop in Brazil and Argentina. If so, cash soybean prices are expected to stay in the $7.25 to $7.40 range this winter." Hurt adds, however, that if growing problems are reported in South America, soybean prices could head back up to $8.
Lines said farmers holding grain don't need to be eager about selling. If they do need cash, he advised that they sell and buy a call option for spring or summer.
"There's not much of a reason to be afraid of this market if they can hold their grain a little longer," Lines said.
He agreed that farmers could see major crop price increases if the weather turns sour in either the South American growing areas this winter or in the Midwest in spring or summer.
Friday's report caught traders off guard because the USDA had been raising production estimates in each monthly report throughout the fall. Traders assumed the final report would top the trend.
But the final report apparently incorporated the effects of the growing season's weather problems in downsizing crop yields. The USDA reported the soybean yield at 37.6 bushels per acre, slightly less than earlier estimates. The national corn yield is 127.1 bushels per acre, slightly higher than the earlier estimate and well above the 113.5-bushels-per-acre average in 1995.
Here are the USDA figures for corn and soybean production in Indiana and Ohio.
Crop 1996 yield per acre (1995) 1996 total production (1995)
Indiana soybeans 38 bushels (39.5) 203.7 million bushels (196.7 million)
Ohio corn 111 bushels (121) 305 million bushels (375 million)
Indiana corn 123 bushels (113) 670 million bushels (598.9 million)
As for planting intentions, Lines said the new crop-price ratio slightly favors soybeans. However, he said farmers would be better off to be "contrarian" so they don't raise total production to the point of cutting into prices.
Hurt noted the USDA's report of a 7 percent decline in winter wheat seedings, which he said improves price prospects for the 1997 wheat crop. "It also spells trouble for corn and soybeans as acreage shifts toward them," he cautioned. "With 3.8 million fewer acres of winter wheat, a large portion of this acreage will be planted to corn and soybeans."
The USDA also increased livestock and poultry price estimates for 1997 in its monthly report. Lines said red meat production was revised downward by 1 percent from last month. Beef prices were raised by $1 per hundredweight, live hog prices were increased $3 per hundredweight, and broilers increased 3 cents per pound.
ACS code/970117 Ag Hurt.markets
ahr/Ag Hurt.markets/9701f18
Sources: Chris Hurt, (765) 494-4273; e-mail: hurt@agecon.purdue.edu;
Allan Lines, (614) 292-5926; e-mail: lines.1@osu.edu
Writer: Amy H. Raley, (765) 494-6682; e-mail: ahr@aes.purdue.edu
