January 16, 2003

Market Advisor: January USDA Report Bearish to Market

By George Flaskerud, Crops Economist
NDSU Extension Service

Futures market prices decreased following the release of USDA reports on Jan. 10. The Winter Wheat Seedings Report was considered friendly to the market but not enough to offset a negative Crop Production Report and Grain Stocks Report. Further bearishness may not be justified as of Jan. 15 given that wheat and corn futures prices were near the lows of last year and soybean futures were near the low end of a trading range. In addition, other factors may partly offset their impact on the supply and demand balance sheet.

Winter wheat acres planted increased from 41.7 million acres to 44.2 million, an increase of 6 percent relative to a year ago. While winter wheat acres were up sharply, they increased less than the trade expected, on average. North Dakota farmers increased their planted acres from 80,000 acres to 130,000 acres.

A breakdown of the U.S. total shows hard red winter wheat acres increased 8 percent to 32.1 million, soft red winter wheat acres decreased 1 percent to 8.2 million and white winter wheat increased 9 percent to 3.9 million. Durum wheat acres in Arizona and California decreased 3 percent to 178,000.

Wheat, corn and soybean stocks were well below levels of a year ago. Unfortunately, they were larger on average than what the trade expected. In North Dakota, all wheat stocks were down 19 percent while durum stocks were up 1 percent. The all wheat stocks include durum.

The crop production report was the most negative for soybeans relative to wheat and corn. It was projected in December to be 2.69 billion bushels, the average trade estimate was 2.688, and 2.73 was reported by USDA.

The net effect of these reports, when combined with export and domestic use information, was for marketing-year ending stocks in the Supply and Demand Report to increase relative to December projections. Corn increased from 843 million bushels to 924, soybeans increased from 175 million to 190 and all wheat increased from 348 million to 418. Total use for wheat and corn was reduced by 75 million bushels and 80 million bushels, respectively, while soybean total use was raised by 25 million bushels.

The seasonal average farm price projection for the current marketing year was reduced from $3.65-$3.95 in December to $3.50-$3.80 for wheat. The corn price was decreased from $2.20-$2.60 to $2.25-$2.55. The soybean price projection changed from $5.05-$5.85 to $5.10-$5.80.

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