NEWS for North Dakotans
Agriculture Communication, North Dakota State
University
7 Morrill Hall, Fargo, ND 58105-5665
January 29, 1998
George Flaskerud, Extension Crops Economist
NDSU Extension Service
A modest rally of crop prices is expected in the weeks ahead to at least $3.95 in Minneapolis May wheat futures, $3.00 in Chicago May corn futures and $7.00 in Chicago May soybean futures, if recent USDA reports are on target. Prices at these levels would represent a recovery of fall-winter price declines of about 65 percent in wheat, 112 percent in corn and 44 percent in soybeans. The price increases are expected in reaction to recent USDA reports, acreage uncertainties and improved exports.
Traders were surprised by a couple of numbers in the USDA reports released on Jan. 13. Dec. 1 corn stocks were about 195 million bushels less than expected by the trade and winter wheat planted acres were about 2.5 million below expectations and about 1.7 million below a year ago.
Where did the corn go? Record uses are being recorded for processing and feed use. These strong domestic uses more than offset continued weak exports, so that the marketing year ending stock projection was reduced relative to a month ago. Ending stocks of corn are now projected to be about 9 percent of total use versus 10.2 percent a month ago.
If the USDA projections are correct for corn, the pace of exports should increase in the weeks ahead and so should prices. If exports are still overestimated, corn prices will drift sideways to lower.
The reduction in winter wheat acres was the greatest in the hard red winter and winter white areas. Each was down about 5 percent. Soft red winter wheat was up about 2 percent. USDA indicated that plantings were particularly low in Montana, Nebraska and Idaho, and that weather problems may have been partly to blame for the fewer acres in Montana and Washington, states that could plant spring wheat.
Dec. 1 wheat stocks were higher than expected. Consequently, USDA reduced the wheat feeding projection by 25 million bushels and seed use projection by 4 million bushels in the supply and demand report. Total ending stocks were increased by those amounts as exports were left unchanged.
Surpassing USDA's export projection for wheat will be difficult. Competition will continue to be felt in the export market. Australia's production was increased again, this time by 1 million metric tons. Exports of wheat to China are expected to remain almost negligible since its crop exceeded last year's record by 12 percent. USDA revised upward China's production estimate by 3 million metric tons to 124 million.
Changes made in the hard red spring balance sheet will temper price increases. Projected ending stocks were increased for HRS to 233 million bushels from the projection made a month ago of 199 million bushels. Domestic use and exports of HRS were both reduced. Durum ending stocks were left unchanged.
Many in the trade are expecting a reduction in total spring wheat acres of 2 million acres. Considering the projected ending stocks for HRS, such a reduction or the anticipation of it in the March 31 Planting Intentions Report appears necessary for the spring wheat price to reach $3.95 in Minneapolis May futures.
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Source: George Flaskerud (701) 231-7377
Editor: Barry Brissman (701) 231-7866