The latest USDA crop report appears friendly to corn and soybean producers, says Melvin Brees, crop economist with the Food and Agricultural Policy Research Institute (FAPRI).
Strong use will lower the projected ending stocks for both corn and soybeans. Lower supplies can be positive for higher futures prices, says the University of Missouri Extension economist.
Corn was helped by a projected increase in ethanol use by 100 million bushels. That was offset somewhat by lower sweetener use and lower exports. Overall usage took 45 million bushels from ending stocks.
“Strong soybean demand continues to chew into the record crop,” Brees says. That includes an increased domestic crush of 10 million bushels and increased exports of 25 million bushels. That cuts ending stocks to 210 million bushels, which was below trade expectation of 219 million. That shorter supply tightens the USDA price forecast by a nickel, ranging from $3.45 to $3.95/bu.
A strong soybean crop in Brazil has been in the news. USDA increased that crop projection by 1 million metric tons to 66 million metric tons. However, the Argentine crop was left unchanged.
Overall, that lowers slightly the world soybean ending stocks to 981 million bushels. On that, USDA forecast bean prices to range lower by 25¢, from $8.70 to $10.20.
Estimates of wheat supply continue to grow. “Wheat stocks remain burdensome,” Brees said. USDA narrowed projected prices by 5¢, with a range of $4.75-4.95.
“Overall, market fundamentals remain negative for crop prices,” Brees says.
While soybean carry-over is tightening, corn carry-over remains more than adequate. Add in a larger Argentine corn crop and large South American soybean crop to soften prices. Domestically, a smaller planted wheat crop and expiring Conservation Reserve Program contracts will free more acres for 2010 corn and soybean plantings.
Economic conditions, including weakening oil prices and a strengthening dollar, are negative for grain prices, Brees says. These fundamentals add market uncertainty and price volatility.
For Brees’ complete commentary, see http://www.fapri.missouri.edu/.