Expectations for an abundant feed-grain crop this year suggest that low feed prices are ahead.
Prospective corn carryover supplies at the end of August look to be about 1.1 billion bushels, which is slightly less than a six-week supply. Soybean projections are for a 150-million bushel carryover, which is nearly a 2.5-week supply.
“When you look at the old crop, the supply is as tight as it’s been in five or six years on both corn and soybeans,” says Darrel Good, University of Illinois, agricultural economist.
Planting acreage for corn at 79 million acres was about the same as in 2002, but acres eligible for harvest are running 4 percent higher, says Bob Wisner, Iowa State University agricultural economist. There were 73.7 million acres of soybeans planted, which is down about 100,000 acres from 2002 levels.
So far, the growing conditions for the 2003 crop have been almost ideal, which could put yields near record highs.
“The ratings have been quite high – 70 percent of the soybeans were rated ‘good to excellent’, and 73 percent of the corn was rated at those levels as of mid-July,” says Good. “The best crops appear to be in Iowa, Minnesota and the Dakotas, while the poorest crops look to be in Indiana and Ohio.”
If conditions hold through the growing season, Wisner expects 141-bushels-per-acre yields on corn. Last year’s national average was 130 bushels per acre. That could produce nearly a 10-billion-bushels corn crop, which could pull up carryover supplies. An average corn crop is about 9.2 billion bushels, says Wisner.
He points out there are 10 new corn processing plants, which could cause a 100-million-bushels increase in corn processing this year. With that increased demand, Wisner thinks the 141-bushels-per-acre yield would result in prices around $2.10 per bushel on a national average.
A normal 40-bushels-per-acre yield on soybeans, would produce a 2.9-billion bushels crop. Between the domestic and export market, about 2.8 billion bushels of U.S. soybeans will be used this year, says Wisner. With a small dip in exports, this crop could increase carryover stocks by 200 million bushels. If that’s the case, 48 percent protein soybean meal will average about $180 per ton (on the Decauter market.)
There have been no weather problems so far, which means there’s a chance to break 1994’s record corn and soybean yields. Wisner says with a 145-bushels-per-acre yield, Western Corn Belt corn prices could fall to $1.75 per bushel.
“It’s possible that yields could go even higher than that,” says Wisner. “If this year has the same deviation over the yields trend as in 1994, we could see corn yields of 158 bushels per acre. That would about double the corn carryover.”
If record yields develop, Wisner expects soybeans prices to be significantly below the loan rate. Soybean meal could drop to $165 to $175 per ton.
While the weather has been generally good, August remains critical. As of this writing, there was still enough growing season left for weather problems to affect yields.
If yields fall back to 128 to 130 bushels per acre for corn, expect the December futures contract to push beyond $3 per bushel, because reserves are so tight, says Wisner.
Soybeans are a bit different, because the United States could export more South American soybeans if prices move too high. Still, weather-related problems could push soybean meal prices up to $200 per ton for the November contract, says Wisner.
As for the U.S. export scene – corn sales have been disappointing; soybean exports are down seasonally with the South American harvest. South America produced another record soybean crop, which provides stiff competition for U.S. soybeans.
“Argentina and Brazil are both up 17 percent from a year ago – and that was an all-time record for both countries,” says Wisner. “In 2002, Argentina was up 26 percent and Brazil was up 33 percent from their 2001 crops. There has been a very rapid expansion of soybean acreage in South America.”
The continued strong crops in South America will continue to pressure U.S. soybeans, keeping soybean meal prices low.
Today’s advice: “Watch new crop corn and soybeans towards the end of the growing season,” says Good. “If conditions are favorable late in the growing season there should be some harvest-time pricing opportunities for corn and soybean meal.”
Wisner suggests keeping an eye on the news. A complete ban on feeding meat and bone meal, could drive demand and prices of feed-grain up. He adds, that could happen in the coming months. Currently, meat and bone meal is banned for most livestock, but not for poultry.