All of the ingredients for volatile corn and soybean prices appear to be in place -- tight stocks; production uncertainties; and fluctuating financial, currency, and energy markets -- making marketing decisions for the 2009 corn and soybean crops challenging. But opportunities to sell at more attractive prices will likely occur periodically over the next 12 months, says Darrel Good, University of Illinois agricultural economist.
Some uncertainty will be addressed with USDA's release of the June Acreage and Grain Stocks reports set for June 30. Of course growing-season weather also will have an impact.
"Fluctuations in the so-called outside markets, however, could continue for an extended period. Further shocks could be provided by developments in bio-energy and climate change policy," notes Good.
He points out that USDA's June projections confirmed prospects for extremely small year-end U.S. soybean stocks, which are projected at 110 million bushels, or 3.6 percent of projected annual consumption. In addition, the U.S. Census Bureau shows soybean exports continuing to exceed the pace reported by USDA.
For the first 8 months of the marketing year, the Census Bureau reports soybean exports of 1.058 billion bushels, 34 million above the cumulative total of export inspections reported by USDA.
"Assuming that margin persists as it did last year and in 3 of the past 4 years, exports need to average 10.2 million bushels per week during the final 11.5 weeks of the year to reach USDA's projection of 1.25 billion bushels. Inspections averaged 10.4 million for the three weeks ended May 11," Good adds.
On the domestic side, the National Oilseed Processors Association reported a crush of 142.2 million bushels during May. That level of crush is about 5 million larger than anticipated.
The Census Bureau will release official crush statistics for May on June 25, but it now appears that the crush for 2009 is on pace to exceed the USDA projection of 1.65 billion bushels.
"It is unlikely, however, that year-ending stocks can be reduced much below the current USDA projection," Good says.
Recent price and basis behavior suggests that sufficient rationing of old-crop soybeans has occurred. Such rationing, however, is not yet apparent in publicly available data.
Corn prices came under similar pressure, but basis levels remained generally firm.
Prospects continue for adequate year-ending corn stocks, but USDA reduced its projection for the end of the 2009/2010 marketing year by 55 million bushels. Those stocks are projected at 1.09 billion bushels, or 8.7 percent of projected use.
Compared to the May projection, USDA dropped U.S. average yield for the 2009 by 2 bushels, to 153.4 bushels. Partially offsetting that decline was a reduction of 100 million bushels in the projection of feed and residual use of corn during the year ahead.
"Some much-needed rainfall in the western Corn Belt has offset ongoing concerns about the late planted crops in the East. In addition, the coming warm up in the western Corn Belt is generally viewed as positive for crop development," Good notes.
However, the most important part of the growing season is still to come. "Although the short-term outlook for warmer weather is viewed as positive, an extended warm, dry period into July, as hinted by some, would not be favorable. There is also lingering uncertainty about the magnitude of planted acreage of corn and soybeans," he says.
USDA's June 30 acreage report will shed further light on the issue.