NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665
June 1, 2000
George Flaskerud, Extension Crops Economist
NDSU Extension Service
Wheat, corn and soybean futures markets face considerable downside risk even after the sell-off on May 30. To determine how low prices could fall with favorable growing conditions during the balance of the season, I have prepared a risk analysis. These projections are not meant to be predictions, just warning signs.
For my analysis, I measured downside risk based on the potential price that might result if spring wheat, durum, corn and soybean yields per planted acre were equivalent to the best of the last 10 years and use equaled USDA's May 12 projections. I left winter wheat yields unchanged at the currently projected levels.
On May 30, Minneapolis December spring wheat closed at $3.53, December corn closed at $3.43 and November soybeans closed at $5.24. My potential prices then are based on historical relationships between stocks/use ratios and these futures prices.
Minneapolis December spring wheat could have downside risk to about $2.90 with spring wheat and durum yields of about 40 bushels per planted acre. One reason for the 63-cent lower potential price is the increased supply of wheat. In addition, Minneapolis futures would lose some of its premium to Chicago futures, possibly about 15 cents.
December corn could have downside risk to about $2.10 with a corn yield of about 128 bushels per planted acre or about 139 bushels per harvested acre. Increased supplies without increased use could result in such a low price.
Similarly, November soybeans could drop to about $4.35 with a soybean yield of about 41 bushels per planted acre and a harvested yield only slightly better. Again, increased supplies without increased use could result in such a low price. In addition, the market would have to expect another good crop in South America and more acres in the United States next year.
###
Source: George Flaskerud (701) 231-7377
Editor: Dean Hulse (701) 231-6136