The U.S. Department of Agriculture's June grain stocks and acreage reports revealed larger numbers than generally expected. Current estimates were negative for corn prices but provided some support for soybean prices.
"Taken together, the USDA reports were negative for corn prices," said Darrel Good, University of Illinois extension economist. "With a slowdown in corn use already happening, year-end stocks will likely be at least 100 million bushels larger than the 1.433 billion bushels projected by USDA earlier in the month. In addition, the acreage estimate suggests that less rationing will be needed next year, although stock levels will still likely decline during the 2008-09 marketing year."
For soybeans, production may fall short of the 3.1 billion bushels USDA projected earlier in the year, keeping stocks extremely tight for another year. Only 306 million bushels of wheat were in storage at the beginning of June, down 33% from a year ago and the lowest since 1949.
"Corn use during the summer quarter will be impacted by the rate of liquidation of animal numbers, which has been extremely modest to date, and the rate of wheat feeding, which should be substantial. Use for the year may fall short of the USDA projection of 6.15 billion bushels," Good said.
Widespread flooding is expected to result in more abandoned acres or, perhaps, more acres harvested for silage. Yield potential is difficult to predict, but based on improving weather, a benign weather forecast for July and improving crop condition ratings, potential yield is likely to be at or above USDA's June assessment of 148.9 bushels. The 2008 production potential may be between 11.8 billion and 12.0 billion bushels, Good said.
Yield potential also is still very uncertain due to late planting in many areas. Favorable summer growing conditions that extend well into September could result in a U.S. average yield near the trend of 42 bushels, producing a crop of more than 3 billion bushels. In general, however, the trade is probably skeptical that a trend yield in soybeans can be attained, Good said.