June 14, 2002

Market Advisor: USDA Ending Stock Projections Close to Trade Expectations

By George Flaskerud, Crops Economist
NDSU Extension Service

USDA released its latest supply and demand report on June 12. Relative to trade expectations, ending stocks of all wheat were just above the trade range of expectations, corn was well above and soybeans were nearly equal to the average of expectations. So even though some of the changes in projections since May were substantial, overall changes were anticipated by the trade, and the impact on prices was minimal.

Crop conditions will continue to dominate market direction. The latest reports by USDA and other analysts are linked at my web site which can be found at http://www.ag.ndsu.nodak.edu/aginfo/cropmkt/cropmkt.htm.

Changes in the 2002-03 balance sheet for wheat reduced the stocks/use ratio from 29.3 percent in May to 26 percent in June. A seasonal price of $2.65 - $3.25 is now expected versus $2.50 - $3.10 last month.

During the past month, projections of planted and harvested wheat acres remained the same, but the yield per harvested acre was reduced from 40.1 to 38.7 bushels. The decrease in production that resulted was partly offset by an increase in beginning stocks so that the decrease in supply was limited to 44 million bushels. Projected food use was reduced by 5 million bushels but the export projection was increased by 25 million. Projections for spring wheat, durum and the other classes will be reported on July 11.

The export projection was increased to reflect smaller crops in China and Australia. But the projection is still 60 million bushels short of the estimate for this past year. The European Union is expected to be major competition.

Crop conditions need to be watched closely. Analysis by Kansas State University economist William Tierney as of June 9 indicated that winter wheat production continued to decrease relative to USDA’s early June survey results.

For corn, planted and harvest projected acres were both reduced by a million and the yield was reduced from 137.9 to 135.8 bushels per acre. Unfortunately, a 25 million bushel decrease in projected exports offset part of the 285 million reduction in supply. Still, stocks are getting tighter, so USDA raised its projected price from $1.75 - $2.15 to $1.90 - $2.30.

Improved corn fundamentals benefitted barley and oats price projections. Even though their balance sheets remained unchanged from May, projected prices for both were increased by 10 cents a bushel.

In contrast to corn, projected soybean planted and harvested acres increased by half a million and yield remained unchanged. Beginning stocks were reduced, but so were exports. Consequently, ending stocks relative to total use increased from 8.9 percent to 9.3 percent.

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Source: George Flaskerud, (701) 231-7377, gflasker@ndsuext.nodak.edu
Editor: Tom Jirik, (701) 231-9629, tjirik@ndsuext.nodak.edu