Economist: Corn and Soybean Supply Prospects Increase

September 14, 2009 07:00 PM

Corn and soybean prices will continue to be influenced by supply factors over the next few weeks, and it seems supply prospects are increasing.
"For corn, the USDA's September forecast placed production potential at 12.955 billion bushels, 194 million larger than the August forecast.  The larger forecast reflects a U.S. yield forecast of 161.9 bushels, 2.4 bushels higher than the August,” said Darrel Good, University of Illinois economist.
Large increases in expected yields were registered for Illinois, Kentucky, Michigan, Missouri, and South Dakota.  The U.S. forecast yield is record large and expected production is only slightly smaller than the record crop of 2007.
"In general, the market anticipates that the U.S. average yield forecast will increase again in October, IF the majority of the crop escapes a killing frost before maturity,” Good said.
He says the western Corn Belt may have the most potential for further yield increases.
"But there is less consensus about the potential change in the October corn production forecast.  That report will incorporate ‘administrative' acreage information -- mostly certified acreage data from the Farm Service Agency.  Some believe that, like last year, the estimate of planted and harvested acreage will be reduced next month due to the late, wet spring in the eastern Corn Belt,” Good said.
While the corn production forecast continues to increase, the USDA once again raised the forecast of expected consumption of U.S. corn during the current marketing year. 
"Feed and residual use is now projected at 5.35 billion bushels, 50 million larger than the September forecast and 100 million bushels larger than use projected for the 2008-09 marketing year.  Projected use is well below the record of 6.157 billion bushels of five years ago, reflecting the impact of reduced livestock numbers and a sharp increase in feeding of distiller grain,” he said.
"The year-over-year increase in expected use is in the residual category, as handling losses increase with a larger crop.  Still, another large increase in distiller's grain production this year makes the forecast look generous.”
U.S. corn exports during the current marketing year are projected at 2.2 billion bushels, 100 million larger than projected last month and 350 million larger than exports for the year ending August 31, 2009.
"This month's increase is based on prospects for a smaller crop and larger imports by Canada and a smaller crop and smaller exports by Argentina in 2010.  The U.S. share of world corn exports is expected to grow from 60 percent last year to 65 percent this year as corn production outside the U.S. declines by about 3 percent,” Good said.
The larger production forecast was also partially offset by a 25 million bushels reduction in the expected size of September 1, 2009 stocks of old crop corn and by a 5 million bushel reduction in expected imports. 
"Still, the larger crop is expected to result in lower prices than forecast last month.  The midpoint of the USDA's forecast of the 2009-10 average price received by producers is $3.35, $.15 lower than projected last month,” Good said.
For soybeans, the U.S. crop is now projected at a record 3.245 billion bushels, 46 million bushels larger than the August forecast.  The U.S. average yield is projected at 42.3 bushels, 0.6 bushels above the August forecast. 
"Yield forecasts for the Corn Belt states were mostly unchanged from last month, with the exception of Indiana where a 2-bushel reduction was registered.  Yield forecasts were increased for all of the plains states, Missouri, and several southeastern states.  Another modest increase in the yield forecast is expected in October, but the production forecast will also be influenced by any changes in acreage estimates,” Good said.
The USDA also increased the forecast of consumption of U.S. soybeans during the current marketing year by 36 million bushels. 
"A larger crush is expected to result from larger soybean meal exports, which result from prospects of smaller exports from India.  Larger soybean exports are expected because of larger imports by China and from lower soybean prices.  The midpoint of the USDA's projection of the marketing year average price received by producers is $ 9.10, $.30 below the August projection,” Good said.
In comparison to USDA's farm price forecasts of $3.35 corn and $9.10 soybeans, while the futures market currently points to an average price of about $3.00 for corn and $8.85 for soybeans.

This news release was provided by the University of Illinois.

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