2009 Year in Review

Weekly Outlook: Corn and Soybean Prices

To date, corn planting delays in the eastern Corn Belt have not had a substantial impact on corn prices, said a University of Illinois Extension marketing specialist.

"Drier-than-expected conditions over the past weekend and a forecast that calls for less rain than predicted last week suggest that corn planting could still be completed in a timely fashion," said Darrel Good.

He added that recent strength in the soybean market provides producers an opportunity to price old-crop inventories.

"In addition, November 2009 futures that are $1 above the spring price guarantee for crop revenue insurance offer a chance to start new crop sales," he said. "Sales of new-crop corn appear less attractive, with December 2009 futures about 20 cents above the spring price guarantee."

Good's comments came as he reviewed the corn and soybean markets where prices for the two commodities have diverged. July 2009 soybean futures traded above $11.25 in overnight trade on May 4, reaching the highest level since last September. Spot cash prices of soybeans exceeded $11 in central Illinois locations as basis levels remained very strong. November 2009 soybean futures traded over $9.90, the highest since early January 2009.

"In contrast, corn prices remain in a relatively narrow range, with July 2009 futures now trading near $4.05 and December 2009 futures near $4.25," he said. "Corn prices are well off the lows reached in late February, when July futures dropped to near $3.50, but the rally has been anemic in comparison to soybeans."

Good said the soybean rally has been lead by old-crop prices and reflects a continued strong export pace and prospects for small year-ending stocks.

"Export demand for U.S. soybeans is being supported by a very small Argentine harvest and continuation of sales to China," he said. "Last month, the USDA estimated the Argentine soybean harvest at 1.433 billion bushels, 265 million smaller than the 2008 harvest.

"Since then, official estimates from Argentina have been reduced further, and it is expected that the revised USDA estimate to be released on May 12 will also be lower."

As of the week ending April 23, the USDA estimated cumulative marketing year exports of soybeans to China at 601 million bushels, 189 million above the total in the previous year. Unshipped sales to China as of April 23 stood at 60 million bushels, about the same as a year earlier.

Unshipped sales to unknown destinations, which may include China, were reported at 28 million bushels, compared to 10 million on the same date last year. Through the first 34 weeks of the 2008-09 marketing year, 60 percent of all U.S. soybean exports went to China, compared to 45 percent during the same period last year.

The USDA's weekly reports of export inspections through April 30 showed inspections to all destinations totaling 1.02 billion bushels, 96 million more than the total of the previous year.

"As pointed out before, the Census Bureau estimates of marketing year soybean exports through February exceeded inspections by 42 million bushels," said Good. "Last year, Census Bureau estimates for the same period exceeded USDA inspection estimates by 26 million bushels. By year end, however, Census Bureau estimates exceeded inspection estimates by 45 million bushels.

"Total exports through April 30, then, could be as large as 1.062 billion. If so, exports during the final 17.5 weeks of the marketing year need to total only 148 million bushels to reach the USDA projection of 1.21 billion bushels, an average of 8.5 million per week."

While the pace of the domestic soybean crush remains slow, it appears that exports could exceed the current USDA projection, resulting in even smaller year-ending stocks than the current projection of 165 million bushels. Those stocks will be revealed in the Grain Stocks report to be released on Sept. 30, 2009. There has been some tendency in recent years, however, for that report to show larger inventories than anticipated, he added.

Export sales of corn have been relatively large in recent weeks, averaging 44.7 million bushels per week for the five weeks ending April 23.

"Accounting for the larger Census Bureau estimate of exports through February, it appears that new sales need to average only 10 million per week to reach the USDA's projection of 1.7 billion bushels for the year.

"Export inspections in recent weeks have also been relatively large, averaging 36.8 million per week for the six weeks ended April 30. Shipments need to average only 31.6 million per week for the rest of the year to reach the USDA forecast."

While exports could exceed the USDA projection, ongoing concerns about feed use of corn suggest that year-ending stocks will be near the current USDA projection of 1.7 billion bushels.

"In addition, the sharp decline in ethanol production in February suggests that corn use for ethanol production has slowed," said Good. "There is some possibility that ethanol use for the year could fall short of the USDA's projection of 3.7 billion bushels."

by  Editor, theCity1.com
May 13, 2009