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Corn+Soybean Digest

Changing Agricultural Supply and Consumption Expectations

USDA’s July World Agricultural Supply and Demand Estimates report contained a number of changes from the June report. According to University of Illinois Agricultural Economist Darrel Good, some of those changes were driven by information in the USDA’s June 30 Acreage and Grain Stocks reports and some were driven by changing U.S. and world production prospects.

For corn, the USDA lowered the projection of domestic stocks on Sept. 1 by 125 million bushels, reflecting the smaller-than-expected June 1 inventory reported earlier. “The change was accommodated by a 175-million-bushel increase in the projection of feed and residual use and a 50-million-bushel reduction in the projection of ethanol use of corn,” Good says.

For the 2010-2011 marketing year, the projection of production was reduced by 125 million bushels, expectations for exports were reduced by 50 million bushels, and the projection of ending stocks was reduced by 200 million bushels.

“Those ending stocks are projected at a four-year low of 1.373 billion bushels,” Good says. “That projection represents 10.3% of projected use, the lowest in seven years.”

The projection of coarse grain production in Russia was reduced by 11% from the June projection. World coarse grain production in 2010-2011 is still expected to be record large. World stocks are expected to decline modestly during the year ahead and are projected at a three-year low.

For soybeans, the projections of both the domestic crush and exports during the current marketing year were increased by 5 million bushels, and the projection of year-ending stocks was reduced by 10 million bushels to a total of 175 million bushels. The projection of 2010 production was increased by 35 million bushels, reflecting the larger acreage estimate released on June 30. The projection of 2010-2011 year-ending stocks was unchanged at 360 million bushels as a result of a 5-million-bushel increase in the projection of crush and a 20-million-bushel increase in projected exports.

Good says changes for soybeans in the rest of the world were minor, with an 18-million-bushel increase in the estimated size of the 2010 Argentine crop. “Stocks in the rest of the world are expected to decline modestly during the upcoming marketing year, but to remain at very large levels,” he says.

From the lows on June 29 to the post-report highs, December 2010 corn futures increased by 55¢ and November 2010 soybean futures increased by 51¢.

“Taken together, the USDA reports appear to be most constructive for corn prices,” Good says. “The market will now anxiously anticipate the corn and soybean production forecasts to be released on August 12. There are very mixed ideas about the effect of an extremely wet June and very mixed July weather conditions on the potential size of the crop.”

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