September 11, 2003

 

Market Advisor: USDA Report Bullish for Soybeans

By George Flaskerud, Crops Economist
NDSU Extension Service

Soybean production estimates came in below the range of trade expectations but corn came in at the high end of the range according to the Supply and Demand Report released by USDA on Sept. 11. The final production numbers for spring wheat and other small grain will be released Sept. 30. Few other changes were made to supply and demand balance sheets except for soybeans, which indicated demand rationing.

Stronger prices are justified by the report for soybeans but not necessarily for corn. Wheat prices have already pulled back from August highs, but should trend higher into fall if exports are strong. December corn faces resistance at the August high of $2.47, the May high of $2.53 and the contract high of $2.69. The November soybean futures chart is technically vulnerable to a sell-off. Storage of soybeans does not look profitable and the profitability of storing corn is questionable. Short crops tend to peak early.

USDA projected an average farm price of $3.10 to $3.50 for wheat, down 20 cents at the top end of the range from a month ago. Reduced import prospects offset reduced food use. Imports were reduced by 7 million bushels for spring wheat and 3 million for durum. These changes left the stocks/use ratio about unchanged from a month ago at 29 percent.

December futures on the Chicago Board of Trade is trading at a price level that would suggest a stocks/use ratio that should be closer to 23 percent. The trade is apparently expecting stronger exports than what is being projected by USDA or at least a strong export pace this fall.

World wheat production was down 2.3 million tons from a month ago reflecting decreases in the European Union, Canada and Argentina which were partly offset by an increase in Australia. In those countries, exports were adjusted accordingly. World exports were reduced by a half million tons.

Canadian durum supplies are expected to increase by 1.8 percent over a year ago, according to Ag Canada (August 29). The Canadian durum crop is expected to increase by 1.7 percent to 3.8 million tons, exports are expected to increase from 3 million tons to 3.4 million tons and carry-out stocks are expected to decrease by 375 thousand tons to 1.2 million tons.

USDA projected an average farm price of $2.10 to $2.50 for corn, up 10 cents from a month ago. Total use remained the same as a month ago even though production was reduced which left smaller stocks. A stocks/use ratio of 10.8 percent was projected versus 12 percent a month ago.

World coarse grain production decreased about 10 million tons from a month ago but trade remained unchanged. The decrease was absorbed almost equally by reduced use and ending stocks.

The December futures are trading at a price level historically consistent with the projected stocks/use ratio for the U.S. The futures contract could trade in the range of $2.30 to $2.60.

USDA projected an average farm price of $5.25 to $6.15 for soybeans versus $4.55 to $5.55 a month ago. Crush was reduced by 70 million bushels, exports were reduced by 60 million bushels and residual was reduced by 12 million bushels. The stocks/use ratio deceased from 7.9 percent last month to 5.1 percent which is about where the ratio ended last year (5 percent).

Nearby futures prices traded mostly in the range of $5.50 to $5.75 during October-December of 2002 and from $6.10 to $6.35 during much of May and June this year. November futures traded as high as $6.30 on Sept. 11.

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