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Corn+Soybean Digest

Wheat Prices Getting Closer To Breakeven

USDA's forecast for 2008-2009 wheat prices is from $6.80 to $6.90/bu. following last week’s World Agricultural Supply and Demand Estimates (WASDE) report. Melvin Brees, University of Missouri Extension agricultural economist, says most analysts consider the report neutral for wheat and bullish for corn and soybeans.

In his analysis of the report on Friday, Brees says USDA’s forecast for increased feed use of wheat and a slight increase in seed use resulted in a reduction in projected ending wheat stocks from 712 million bushels in March to 696 million bushels in April.

“This was near the average prereport trade expectation,” says Brees. “However, world wheat carryover continues to increase. In spite of small downward adjustments to total world production, increases in beginning stocks and reductions to expected use more than offset production changes and world wheat carryover is expected to be 158.10 million metric tons (mmt). This is up 2.25 mmt from the previous estimate.”

For soybeans, Brees says the tight domestic bean supplies and significant reduction in expected world carryover, along with the less-than-expected prospective soybean plantings released earlier, led many to expect double-digit gains in soybean futures prices following the report. “Price gains are also expected to be supported by higher oil prices and other outside factors,” he says.

“Weather is also beginning to catch the market's attention. If cool wet conditions continue in the Corn Belt, planting delays may contribute to lower 2009 production expectations and acreage shifts.”

USDA says strong U.S. soybean exports contributed to a 25-million-bushel increase in projected 2008-2009 exports. “This, along with increased seed use, was partially offset by increased imports and a reduction in expected domestic crush,” says Brees. “The net result was a 20-million-bushel reduction in 2008-2009 soybean ending stocks from last month's 185 million bushels to 165 million bushels. This was within the prereport range of expectations and just below the average expectation of 169 million bushels.

“World soybean ending stocks estimates were reduced significantly from the previous estimate of 49.95-45.84 mmt. This reduction was largely due to a reduction in projected Argentine production from 43 mmt to 39 mmt and the cut in U.S. ending stocks.” USDA's forecast 2008-2009 soybean prices were adjusted upward by 40¢ on the low end and up 20¢ on the upper end of the expected price range, with prices now forecast to range from $9.25 to $10.05.

USDA’s corn feed use projections were increased 50 million bushels and food, seed and industrial uses cut 10 million bushels. “This produced a 40-million-bushel reduction in 2008-2009 corn ending stocks, now estimated at 1.7 billion bushels,” says Brees. “This was within the range of prereport trade estimates, but below the average prereport expectation of 1.731 billion bushels.” The reduction in projected corn carryover and stronger world corn exports contributed to a reduction in expected world corn ending stocks from last month's 144.6 mmt to 143.3 mmt. Brees notes that no changes were made to expected Argentine production, but Brazilian corn production was increased 1 mmt from 49.5 mmt to 50.5 mmt. USDA's forecast 2008-2009 corn price range was increased 10¢ and is now expected to range from $4 to $4.40.

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