Corn Stocks to Tighten but Prices Should Strengthen

Slightly higher soybean stocks unlikely to deflate bean price buoyancy.

USDA's pegs 2007-08 U.S. corn ending stocks at 1.438 billion bushels. That's up from the Aug. 31 2007 corn carryout of 1.304 billion bushels, but still well-below 2005-06's 1.967 billion.

USDA's early projection puts 2008-09 ending stocks at 1.243 billion bushels. That 14% decline would draw stocks down to the tightest level of the last four years.

"The stocks-to-use ratio is projected at 9.5%, down for a fourth straight year and below the 11.1% projected for 2007/08," explains Mark Ash, economist with USDA's Economic Research Service. "The gradual tightening of stocks relative to use mostly reflects growth in ethanol production.

"The average price received by farmers is projected at a record $4.60 per bushel, up $0.60 from the mid-point of the 2007/08 forecast," he says. "Prices received by producers are expected to be heavily influenced by forward sales opportunities as strong new-crop futures allow producers to lock in good returns ahead of planting."

A buck up in beans. U.S. soybean ending stocks for 2008/09 are forecast at 169 million bushels, up just 9 million from 2007/08. Given the very attractive opportunities to forward price for post-harvest delivery, the season average farm price is projected at a record $11.50 per bushel, up from $10.40 per bushel in 2007/08.

Tighter global oilseed stocks, strong corn and wheat prices, record vegetable oil prices and high soybean meal prices are expected to support record price levels for soybeans in 2008/09.

Wheat prices could run higher despite near doubling of stocks. The combination of higher supplies and lower use in 2008/09 will boost ending wheat stocks from 272 million bushels to 538 million, near the levels seen during 2003/04 through 2005/06. Similarly, the projected stocks-to-use ratio will more than double to 25%, in line with those same years.

While the 2008/09 balance sheet indicates a reversal from the current market tightness, the season-average U.S. farm price is expected to rise modestly to $7.00 per bushel, up 35 cents from the mid-point of the 2007/08 projection. Producers' forward contract prices have been well above $7 per bushel and cash prices during the early months of the marketing year will be supported by risk premiums associated with global production uncertainty until foreign crop prospects are better known. U.S. wheat prices during the first quarter of the marketing year will also see considerable support from strong competition between domestic mills and foreign buyers.

TAGS: USDA
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