Lower U.S. forecast across the board

URBANA, Ill. – After the USDA August crop reports pushed 2002 marketing year futures prices to new contract highs, the market will now try to decide how subsequent crop forecasts will differ from the August forecast, said a University of Illinois Extension marketing specialist.

“In addition,” said Darrel Good, “the market will try to evaluate the strength of demand. For now, I still anticipate an early season high in both corn and soybean prices.”

Crop report surprise. Good’s comments for the USDA’s August Crop Production report, which contained a surprisingly small forecast of the 2002 U.S. corn and soybean crops and a much lower estimate of the wheat crop. If final production estimates are near the August forecast, the consumption of U.S. corn and soybeans will have to decline during the 2002-03 marketing year. This will be the first year of “rationing” since 1995-96.

The 2002 U.S. corn crop is forecast at 8.886 billion bushels, nearly 200 million less than the average trade guess. The small production figure reflects a forecast of harvested acreage of only 71 million acres and a national average yield of 125.2 bushels per acre.

The forecast yield is 13 bushels below last year’s yield and would be the lowest in seven years. In Ohio, the forecast yield declines are 26 bushels.

For the 2002-03 marketing year, the USDA sees a 115-million-bushel increase in domestic processing use of corn and a 100-million-bushel increase in exports.

“In order to keep year-ending stocks above a pipeline level, domestic feed and residual use is expected to be reduced by 225 million bushels,” said Good.

World view. Good added that the small U.S. feed grain crop is not expected to be offset by larger production in the rest of the world.

World coarse grain consumption is expected to exceed production by 36 million tons, or 4.2 percent.

The USDA projects the 2002-03 marketing year average price of corn in a range of $2.30 to $2.70 per bushel, compared to $1.93 for the year just ending.

. Soybean outlook The 2002 U.S. soybean crop is projected at 2.628 billion bushels, the smallest crop since 1996.

“The projection reflects harvested acreage of just over 72 million acres and a national average yield of 36.5 bushels per acre,” said Good. “The yield forecast is 3.1 bushels below last year’s average and would be the lowest yield since 1995. Significant declines are expected in the eastern Corn Belt.”

For the 2002-03 marketing year, consumption of U.S. soybeans will have to decline in order to maintain carryover stocks at a pipeline level of about 150 million bushels.

The small U.S. soybean crop is expected to be partially offset by a larger South American harvest in 2003. That crop is projected at three billion bushels.

“The forecast suggests that the South American crop will exceed the U.S. crop for the first time,” said Good. “South American exports are expected to jump by 40 percent during the 2002-03 marketing year.”

World inventories of soybeans are expected to be reduced to the lowest level in five years. The USDA projects the season’s average price of soybeans in a range of $5.15 to $6.05, compared to the $4.35 average price for the year just ending.

Wheat inventories down. The U.S. wheat crop is estimated at 1.686 billion bushels, 63 million smaller than the July forecast and 272 million less than the 2001 harvest. As a result, inventories of U.S. wheat are expected to be reduced to 467 million bushels by the end of the marketing year (June 1, 2003).

“That would be the smallest year-ending inventory in six years,” said Good. “Like coarse grains, foreign wheat production is not expected to offset the smaller U.S. crop. Foreign production is forecast at 526 million tons, almost identical to the size of the 2001-02 harvest.

The USDA projects a season’s average price in a range of $3.20 to $3.80, compared to last year’s average of $2.78.