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July 7, 2005 Market Advisor: Fundamental Outlook for Some Crops Has Changed
The supply-and-demand situation has changed in the last couple of months for some commodities. Part of the change is due to a modification in acres planted compared with March planting intentions, and smaller than expected corn and soybean stocks. However, weather has been the dominant influence on price and will continue to be the critical factor. Weather may affect crop potential in Australia, China and India, as well the U.S. The crop that is being affected the most is soybeans. Wheat and corn prices also are being impacted. Futures prices peaked in June at $3.78 per bushel for Minneapolis December wheat, $2.56 for December corn and $7.70 for November soybeans. Prices then fell sharply through the end of June before recovering and trading on July 5 as high as $3.75 for December wheat, $2.55 for December corn and $7.36 for November soybeans. The current stocks-to-use ratio for soybeans could be around 7 percent, which in recent years has resulted in a November futures price at harvest in the broad range of $5.50 to $7.50. The ratio for the 2004-05 marketing year was projected to be 10.9 percent by the USDA in the June supply- and-demand report and 8.6 percent for 2005-06. Planted acres were projected to be down 2.5 percent from a year ago by the USDA in the June 30 acreage report and down 0.8 percent from planting intentions. June 1 stocks were 2.1 percent smaller than trade expectations. The stocks report also was released by the USDA on June 30. For corn, the current stocks-to-use ratio may have shrunk from earlier expectations, but still is likely to exceed last year’s burdensome ratio of 21 percent. A ratio like that has resulted in $2 December futures at harvest in the past. Planted acres were projected to be up 0.8 percent from a year ago and up 0.2 percent from planting intentions. Smaller than expected June 1 stocks offer little relief. For wheat, the situation is much the same as corn. The stocks-to-use ratio could exceed the 23.4 percent for last year by a significant amount and make price rallies especially attractive. Planted acres for spring wheat (other) were projected to be up by 2.4 percent from a year ago even though that is down 1.9 percent from the planting intentions report. Durum producers were projected to plant 0.5 percent more acres than a year ago, but 1.3 percent less than March intentions. June 1 stocks for all wheat were 1.3 percent larger than trade expectations. Exportable supplies are likely to tighten for hard red spring wheat and soft red winter wheat relative to a year ago. These two classes could absorb most of the 110 million bushel reduction in overall wheat exports that the USDA projected in the June supply-and-demand report for 2005-06. The USDA will project balance sheets for the classes of wheat beginning with the July 12 report. Prices are likely to be very volatile in the weeks ahead. Use rallies to your advantage, but be careful because most commodities face substantial downside price risk. ### Source:
George Flaskerud, (701) 231-7377, george.flaskerud@ndsu.edu |
Market Advisor: |
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North Dakota State University |
