URBANA, Ill. — In the short run, another round of harvest delays has supported corn and soybean prices, and strong demand for corn for ethanol may also provide longer term support.
However, according to University of Illinois Economist Darrel Good, at some point, the soybean market may suffer from a very large South American harvest.
Corn and soybean prices continue to trade in a relatively wide range, but are currently near the highs of the past 10 weeks, and Good says basis levels have weakened some as harvest accelerated.
The average cash price of corn in central Illinois peaked at $3.83 on Oct. 22, declined to $3.41 on Nov. 6, and stood at $3.62 on Nov. 13, Good said.
The average cash price had dipped under $3 in early September. The average cash price in central Illinois was 28 cents under December futures on Nov. 13, compared to about 15 cents lower four weeks earlier.
He says corn prices have been supported by ongoing harvest delays as well as expectations that demand for corn-based ethanol will remain strong in the months ahead.
“Ethanol prices have moved sharply higher since late September, supported by very favorable blending margins,” Good said.
Reduced imports of Brazilian ethanol and some exports of U.S. ethanol have contributed to those margins.
“The EPA ruling on increasing the limit on blending from 10 percent to up to 15 percent will be important for determining domestic market size moving forward,” the economist added.
“It appears that the self-imposed deadline of Dec. 1, 2009, for making that decision will not be met.”
On the export front
The level of corn export sales in recent weeks has been disappointing.
Sales averaged 16.3 million bushels per week for the four weeks ending Nov. 5, but Good said sales need to average well over 30 million per week in order to meet the current marketing year export forecast of 2.1 billion bushels.
Weekly export inspections averaged 26.5 million bushels per week during the five weeks ending Nov. 12. Shipments now need to average nearly 42 million bushels per week through August 2009 in order to reach the current USDA projection.
The jury is still out on the likely level of feed and residual use of corn this year.
“Some analysts believe that the generally poorer quality crop will result in higher rates of corn feeding, while others believe the poorer quality will lead to higher levels of feeding of other ingredients, particularly soybean meal,” Good said.
“Initially, the large supply of low-priced corn screenings might result in at least a normal rate of corn feeding per animal.”
It is still almost two months before the Dec. 1 corn stocks estimate, which will allow a calculation of feed and residual use of corn during the first quarter of the 2009-10 marketing year.
The average cash price of soybeans in central Illinois dropped below $9.00 in early October, peaked at $9.96 Oct. 21, and stood at $9.635 Nov. 13. The average cash price on Nov. 13 was 29 cents below March 2010 futures, compared to about 11 cents below three weeks ago.
Good said soybean prices have been supported by a rapid pace of exports and export sales. Through Nov. 5, export commitments, or exports plus outstanding sales, stood at 68.5 percent of the total exports projected for the marketing year.
Export demand for U.S. soybeans will be concentrated in the first half of the marketing year and is expected to drop sharply with the availability of the South American harvest.
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