NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665

April 8, 1999

The Market Advisor: Crop Prices Drop to
Fundamental Value Following USDA Report

George Flaskerud, Extension Crops Economist
NDSU Extension Service

Most futures prices dropped about to values expected at harvest following release of USDA's Planting Intentions Report on March 31. Most prices on April 1 were at levels that require at least expected yields to materialize. Any adverse growing conditions should result in pricing opportunities.

The spring wheat September futures price will likely average $3.40 to $3.65 at harvest. The September contract closed at $3.50 on April 1, which is consistent with the fundamentals as known. The report indicated that about 63 million acres of wheat would be planted, down 4 percent from a year ago. Based on those acres, stocks of all wheat at the end of the 1999-2000 marketing year would be about 31 percent of total use, if expectations are met -- a yield of 39.3 bushels, feed use of 300 million bushels and exports of 1.15 billion bushels. These expectations are similar to those anticipated by a number of market analysts.

The durum wheat September futures contract suggests a farm price of $2.60 to $2.80 for milling quality durum. Poor quality durum could be at a severe discount to that price. The Planting Intentions Report indicated that durum acres be up 12 percent in the United States and up 20 percent in North Dakota. My meetings with durum producers would indicate that acres will be down in northwest North Dakota, where the good quality is generally produced, which means a lot of durum production could be of low quality and value, depending on input use and growing conditions.

World fundamentals are a major problem for durum prices. Carryover stocks are already high in the United States, Canada and European Union (EU) and are likely to get higher during 1999-2000 marketing year. Canadian stocks could increase even if production is cut substantially since it would take about a 25-percent reduction for their ending stocks to remain nearly unchanged. EU production is likely to increase based on February projections by the International Grains Council. North Africa, a wildcard as usual, will likely maintain area planted, but yields are always an uncertainty there.

The December futures price for corn will likely average $2.20 to $2.40 at harvest, whereas the December contract closed at $2.41 on April 1. The report indicated that about 78.2 million acres would be planted, down 2 percent from a year ago. Based on those acres, stocks at the end of the 1999-2000 marketing year would be about 16 percent of total use -- given a yield of 129.8 bushels, domestic use of 7.7 billion bushels and exports of 1.8 billion bushels.

Malting barley prices have potential for the 1999-2000 marketing year. Barley acres in the report were down 17 percent at the U.S. level and down 25 percent in North Dakota. Trend yields would result in a production decrease of 15 percent, meaning that imports would have to be increased or total use would have to be sharply reduced. A significant increase in imports from Canada may not be possible if their production and use remains the same as during this past year. That leaves rationing of supply through higher prices as likely for 1999-2000.

The November futures price for soybeans will likely drop below $5 at harvest, whereas the November contract closed at $5.06 on April 1. The report indicated that about 73.1 million acres would be planted, up 1 percent from a year ago. Based on those acres, stocks at the end of the 1999-2000 marketing year would be about 20 percent of total use -- given a yield of 39.2 bushels, domestic use of 1.83 billion bushels and exports of 930 million bushels.

Oilseed prices in general are likely to be at loan this fall on the farm. In addition to soybean acres being up in the report, oil sunflowers were up 5 percent, nonoil sunflowers were up 43 percent and flax acres were up 55 percent.

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Source: George Flaskerud (701) 231-7377
Editor: Dean Hulse (701) 231-6136