1.Corn Prices Likely To Remain Volatile
2. Larger Stocks May Not Mean No Potential for Soybean Prices
3. So Far, This Corn Defies the Drought
Corn Prices Likely To Remain Volatile
MANHATTAN, Kan. – Early May’s dramatic price rally may just be the first
for 2000 corn.
"We can expect continued volatility in December [corn] futures until
moisture reserves are replenished or the crop is ‘made,’" said Kansas
State University economist Bill Tierney.
For growers who market aggressively, chances to improve their year’s
returns by more than 10 percent could be a possibility, he said.
In fact, the economist’s current analyses indicate only two factors as
likely candidates for limiting any upcoming "weather-market" rally:
* If 1999-00 corn exports drop further.
* If March-June U.S. livestock feeding is lower than expected.
The December contract typically reaches its seasonal high in June-July,
said Tierney, who is the grains marketing analyst for K-State Research
and Extension. But, any significant weather threat could take the
contract’s highs 20 to 25 cents a bushel above the "average" long-term
seasonal trends suggest.
"If a producer sold new-crop corn -- either by forward contract or
hedging in December futures -- and then ‘covered’ those sales with the
purchase of a September corn call option, the producer would be prepared
for most contingencies," he said.
Corn planting went at a record-early pace this spring. Sorghum planting
was equal to its 15-year average, the economist said.
And, history indicates that the earlier the planting ...
* The more likely corn and sorghum acreage will be larger than
* The higher the average yield.
Thus, the year’s U.S. corn acreage could come close to matching
producers’ stated intentions of planting 77.9 million acres, Tierney
said. Plus, corn yields could exceed the expected "trend average" of
136.4 bushels an acre -- IF growing-season rains come at the right times
and in the needed amounts.
"By the second week of May, corn plantings were 78 percent complete.
Models suggest that could add as much as 5 bushels to trend yields,
putting the average at 141.4 bushels an acre," he said Sorghum acreage
is likely to set a record low for modern times, the economist added.
But, it could be somewhat larger than expected, "depending on the
availability of soil moisture and the extent of winter wheat abandonment
or graze out in the central and southern Plains." In any case, yields
may very well come in at an average 70.2 bushels -- IF the weather
So, for U.S. ending stocks to decline even slightly from 1999-00 levels,
domestic feeding and industrial use will have to increase. And, export
sales may need to rise.
If the current outlook for 1999-00 exports is a clue, increasing exports
could be a challenge.
In mid-April, U.S. corn export commitments were close to 1.5 billion
bushels, up 4 percent from year-earlier levels. That represented just 79
percent of USDA’s projected 1.9 billion bushels in sales for the year,
however. Mid-April bookings typically account for 85 percent of annual
exports, Tierney said. "That suggests the USDA’s export projection is
145 million bushels too large," he said.
Asian countries, particularly Korea, may help take up some of the slack.
Korea recently suspended buying Chinese corn, due to an outbreak of foot
and mouth disease. It reported the source of that infection was "foreign
material" (rice straw) contained in earlier imports.
U.S. sorghum exports in mid-April totaled 199 million bushels or some 56
million more than last year’s. But, they accounted for 85 percent of
USDA’s 235 million bushel forecast for the year. April’s bookings
usually add up to 95 percent of the annual total.
Beyond that, exports from the Southern Hemisphere are poised to
increase, due to larger corn crops in South Africa and Argentina.
South Africa’s harvest is well underway and seems likely to produce a 30
percent larger crop, the economist said. So, that nation’s
October-November net exports could increase 12 million bushels, totaling
67 million bushels for the 2000-01 trade year.
Argentina, which has almost completed its harvest, will probably bring
in a 15 percent larger crop. In turn, its exports could be up 12 percent
in the coming year, Tierney said.
K-State Research and Extension is a short name for the Kansas State
University Agricultural Experiment Station and Cooperative Extension
Service, a program designed to generate and distribute useful knowledge
for the well-being of Kansans. Supported by county, state, federal and
private funds, the program has county Extension offices, experiment
fields, area Extension offices and research centers statewide. Its
headquarters is on the K-State campus in Manhattan.
Kathleen W. Ward
K-State Research & Extension News
Tierney may be contacted at firstname.lastname@example.org
Released: May 9, 2000
Stocks May Not Mean No Potential for Soybean Prices
But, for soybeans, another price-improving possibility is that 1999-00
U.S. carryover stocks may not be as large as currently projected.
This spring, U.S. Department of Agriculture economists estimated the
average price for the 2000-01 soybean marketing year will be more than
80 cents a bushel below the government’s announced marketing loan rate.
Tierney, the grain marketing analyst for K-State Research and Extension,
doesn’t deny that kind of price difference is possible.
A study of past price-to-loan relationships suggests USDA’s outlook
could be too pessimistic.
"However, because of the existence of the ‘marketing loan,’ past
historical relationships – [from] when the old ‘non-recourse loan was in
effect – may not be a reliable guide to how low prices can fall when
stocks build to such large levels," he said.
Those stocks are part of a supply-demand situation that’s unusual, too.
World oilseed production increased 1 percent this year, after rising 2.3
percent in 1998-99 and nearly 10 percent in 1997-98.
Those back-to-back increases weren’t needed while growth in the world’s
oilseed consumption remained in a slowdown, Tierney said.
When measured as a percentage of use, however, ending oilseed stocks
should actually decline slightly this year, due to recovery in several
Asian countries, combined with the lowest oilseed prices in more than 25
years. Although oilseed carryover stocks have been increasing since 1996
(when they established new lows) this year’s stocks-to-use ratio should
remain well under the 34-year average.
"More significantly, the share of total world oilseed use met by imports
will increase for the fourth year in a row and now stands at 20
percent," the economist said.
The 1999-00 U.S. and South American soybean crops are creating a similar
balance. On March 1, those crops totaled 90.3 million metric tons or
about 2 percent less than the previous year’s supply.
"This figure represents about 208 percent of total U.S. soybean
disappearance for the previous six-month period (September-February). On
average, the March 1 supply of soybeans is 195 percent of first-half
U.S. disappearance. However, this is a significant decline from last
year, when the supply-use ratio was 227 percent," Tierney said.
In April, U.S. soybean, meal and oil export commitments were all
on-target to meet USDA’s annual projections, he said. In fact, soyoil
sales were suggesting USDA’s export projection for the 1999-00 marketing
year could be as much as 175 million pounds too low.
The economist added that meeting USDA’s projected ending stocks of 305
million bushels will require three developments:
1. Crush in the second half of the marketing year must total no more
than 90 percent of the first half’s crush. Since 1975, the second-half
crush has averaged 92 percent of the first half’s.
2. Exports during the last six months of the year must not exceed 51
percent of first-half exports. With an Aug. 31 end for the marketing
year, soybean sales in mid-April were 89 percent of USDA’s annual
projection. Soymeal commitments were equal to and soyoil exports well
ahead of the average needed to meet USDA’s forecasts.
3. The statistic called "residual usage" for the last half of the
marketing year must be a negative 69 million bushels. If it does, it
will be about 40 million (negative) bushels larger than the average for
the past 24 years: a negative 29 million bushels.
"If the second-half residual is not a large negative number, but is
closer to ... a negative 30 million bushels, ending stocks of soybeans
could end up being 40 million bushels smaller than currently projected,"
Kathleen W. Ward
K-State Research & Extension News
Tierney may be reached at email@example.com
This Corn Defies the Drought
Despite soil-parching drought, green sweet-corn plants tower six
feet above protective organic
mulch in a cornfield in Beltsville, Md. Nearby, corn planted in bare
soil won't be worth harvesting. Both fields are at the Beltsville (Md.)
Agricultural Research Center (BARC), part of the Agricultural Research
Service, USDA's chief scientific agency.
Key to sustaining the corn through the drought is hairy vetch, a legume
grown as a cover crop. The vetch--killed before researchers planted the
corn--forms a dense mat. It helps rain or irrigation water seep in
rather than flow across fields and erode the soil. The mulch also slows
evaporation and supplies natural nitrogen fertilizer.
The 7,000-acre BARC now uses hairy vetch to grow much of the corn needed
for its livestock. The researchers have already developed vetch systems
for tomatoes--now being adopted by some growers--and are testing similar
cover crops with peppers, cantaloupes, snap beans and other vegetables.
Organic mulch is vital to the center's program in sustainable
agriculture--that is, farming in ways both economical and
environmentally friendly, and relying on renewable, on-farm resources.
That's why biodiesel is the newest contribution to Beltsville's
seven-year-old sustainable farming program. Beginning this month,
biodiesel, a mix of 20 percent soybean oil and 80-percent regular diesel
fuel, will power all farm and road crew diesel vehicles on the center's
6,000-acre east side. Researchers will compare the two fuels for engine
performance and wear. The program is part of a federal effort to reduce
reliance on petroleum while creating new markets for U.S. crops. A fact
sheet on the center's biodiesel use is on the web at: http://www.ars.usda.gov/is/pr/1999/990811.biodiesel.htm
Scientific contact: Ronald F. Korcak, ARS Beltsville Area Office,
Agricultural Research Service, Beltsville, Md., Beltsville, Md., phone
(301) 504-5193, fax (301) 504-5863, firstname.lastname@example.org.
Agricultural Research Service / News Staff / Photo Staff / ARS News &