April 9, 2008
Tighter Corn Supplies
The USDA's April 9, 2008, World Agriculture Supply and Demand Estimates (WASDE) projects tighter corn supplies, an increase in soybean carryover and no changes for domestic wheat supply/demand estimates.
Corn 2007-08 ending stocks are now estimated at 1.283 billion bushels, which is 155 million bushels less than the March estimate. This estimate, while slightly below the average guess, is within the range of pre-report trade expectations. Ethanol use is cut 100 million bushels, but this was more than offset by 200 million bushels increase in feed use along with small increases in other uses. Export projections are also increased by 50 million bushels. The decrease in US ending stocks more than offset small foreign gains and world corn ending stocks are expected to decline from 104.03 mmt last month to the current estimate of 102.97 mmt. Smaller carryover usually leads to higher prices and 2007-08 corn prices are now expected to range from $4.10 to $4.50.
Soybean 2007-08 ending stocks are projected to be 160 million bushels. This is up 20 million bushels from the March estimate, but near trade pre-report expectations. The only change in soybean supply estimates is a small increase in imports. Crush, seed and export estimates are increased, but these increases are more than offset by a reduction in residual use to a very low two million bushels. This suggests 2007 crop size may have been underestimated. The increased US ending stocks estimates, along with small reductions in Brazilian and Argentine soybean use, results in an increase in world soybean ending stocks from 47.44 mmt to 49.31 mmt. Forecast 2007-08 soybean prices are reduced thirty cents on the top end of the previous range and are now expected to range from $10.00 to $10.50.Wheat 2007-08 ending stocks projections are unchanged from last month. Reductions totaling 50 million bushels from feed and residual use are offset by 50 million bushels increase in projected exports. The forecasted wheat price range is narrowed by five cents and now expected to range from $6.55 to $6.75.
The corn ending stocks situation has changed significantly since last fall. In October 2007, corn ending stocks were projected to be nearly two billion bushels. Although the current estimated carryover of 1.283 billion bushels will still be adequate for the current year, this smaller carryover coupled with the expected reduction in 2008 corn acres raises serious concerns about 2008-09 supplies. High production costs, marketing risks and the increasing possibilities of serious wet weather planting delays add to corn supply concerns. This will likely be reflected in volatile market price action in the weeks ahead as weather and 2008 crop production prospects continue to be the focus of market attention.
Next update following the May 9, 2008, WASDE report.