There is a lot of growing season left, but current crop and weather conditions suggest a possibility for further weakness in corn and soybean prices in the near term.
"Crop condition ratings and our crop weather model suggest that the U.S. average yield could be a bushel above the USDA projection if summer weather is near average and an early freeze is avoided," says Darrel Good, U of I Extension marketing specialist. "The lateness of the crop and extensive re-planting, however, make yield prospects very uncertain."
According to Good, the USDA's yield estimate in the August Crop Production report will be based on a very immature crop, but the acreage estimate will be important.
Corn prices and, to a lesser extent, soybean prices have come under pressure over the past two weeks. The weakness started with the USDA's June Acreage report and continues as production prospects improve.
On July 11, the USDA released the monthly World Agricultural Supply and Demand Estimates report.
"For corn, that report confirmed trends revealed in the June 30 Grain Stocks report and general trade expectations," Good notes. "The forecast of feed and residual use of corn during the current marketing year was reduced by 100 million bushels."
Good says this reflects the larger-than-expected June 1 inventory as well as a 30-million-bushel increase in projected feed and residual use of wheat this summer.
He adds, "The forecast of ethanol use of corn during the current year was reduced by 50 million bushels and the projection of other processing uses was reduced by 15 million bushels."
For the 2008-09 marketing year, the U.S. average corn yield is forecast at 148.4 bushels, based on a linear trend from 1990 through 2007 adjusted for late planting and emergence and a smaller portion of harvested acreage in the Corn Belt.
"That forecast is 0.5 bushels below the June forecast," says Good. "Production is forecast at 11.715 billion bushels. Consumption forecasts were little changed from June with a 50-million-bushel increase in feed and residual use and a 65-million-bushel reduction in food and industrial use."
Good adds that some believe that ethanol use of corn will not reach the USDA projection of 3.95 billion bushels, but margins have improved significantly as a result of the recent drop in corn prices. Year-ending stocks are expected to be small at 833 million bushels, but 160 million larger than forecast last month.
Generally favorable weather in recent weeks and a forecast of needed precipitation in parts of the northern Corn Belt suggest that corn production prospects are continuing to improve. Crop condition ratings, along with our crop weather model, suggest the U.S. average yield could be two to three bushels above the USDA forecast if at least average weather conditions persist, Good adds.
The first yield forecast based on producer surveys and field observations will be released on Aug. 12.
"Crop maturity is late enough that yields will be difficult to estimate," he notes. "However, the adjustments, if any, to planted and harvested acreage estimates will be very important."
For soybeans, two changes were made in the projections of use during the current marketing year.
"Exports are now projected at 1.145 billion bushels, 35 million larger than the June projection," Good explains. "The larger projection likely reflects the ongoing strong pace of shipments and the fact that Census Bureau export estimates through May exceed the USDA's cumulative export inspection estimate by 29 million bushels."
"The larger export projection was offset by a reduction in the projection of residual use," Good notes. "That use is now projected at minus-35 million bushels, further evidence that the 2007 crop was underestimated."
For the 2008-09 marketing year, the U.S. average soybean yield is projected at 41.6 bushels, based on 1989 through 2007 regional trend analysis adjusted for late planting and emergence. That projection is 0.5 bushels below the June forecast and, when coupled with fewer acres revealed in the June Acreage report, results in a production forecast of three billion bushels.
"That forecast is 105 million below the June forecast," he concludes. "The projection of use during the 2008-09 marketing year was 67 million below the June forecast, but the projection of year-ending stocks declined by 35 million bushels, to a total of only 140 million bushels."