| Melvin
Brees Farm Management Specialist University of Missouri Extension |
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Decisive
Marketing |
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May
11, 2001
More of the Same? USDA’s May (5-10-01) Supply and Demand Report provided a first look at 2001-02 crops. For new crop corn and soybeans it appears that the situation continues to be big production, increasing ending stocks and low prices. Only the wheat numbers suggest tighter supplies and potential for higher prices. Expect the largest soybean crop ever. Increased acreage and an estimated yield of 39.5 bpa would produce a record 2.985 billion bushels of soybeans. This would make five consecutive years of the largest U.S. soybean crops! The ending stocks are expected to increase to a burdensome 500 million bushels, second only to 536 million in 1985-86. This could result in the lowest prices since 1972, ranging $3.90 to $4.50. In spite of reduced planted acres this year, the fourth largest corn crop may be produced. While use (9.665 Bil. Bu.) might exceed production (9.575 Bil. Bu.), an increase in ending stocks from the 2000-01 crop will provide more than enough supply – leaving ending 2001-02 ending stocks near 2 billion bushels (1.983). The projected annual price – range is $1.65 to $2.05. Wheat supplies may tighten some. New crop ending wheat stocks are expected to b591 mission bushels compared to this past year’s 825 million bushels. Even with slower demand, this could result in prices about forty-cents higher ranging $2.75 to $3.35. For corn and soybean producers, the USDA numbers suggest another year of low prices and weak basis at harvest time. Current new crop soybean bids, already approaching the low end of USDA’s project price range, offer no incentive to forward price. The CCC market loan and associated LDP will again be a major part of any marketing strategy – especially soybeans. The loan program provides price support protection at prices that are well above current new crop soybean prices. Plan on avoiding cash sales and storing at harvest. Futures contract prices lows typically occur at harvest time for large crops. In addition, the especially weak basis of recent years has also occurred during harvest. The combination of low (futures) price and weak basis produces very low cash prices. Currently (5-10-01) March 2002 futures contracts offer nearly twenty-cents carry for soybeans and more than ten-cents for corn. These market carries, along with the potential for ten to twenty cents basis strengthening, are market signals to begin marking plans for storage of new crop corn and soybeans. Remember this is only the first look at new crop supply and demand. The situation nearly always changes! Sometimes it gets worse. Sometimes it gets better. Weather is still the “wild card” that would have major impact on supply and prices. For the last two years, major increases in soybean carry over stocks near 500 million bushels have been expected. However, due in part to strong demand, ending stocks have ended up below 300 million. So the numbers might change, but for now expect and plan for more of the same – big supplies and low prices. --Melvin |
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