A slow export pace is keeping pressure on corn and soybean prices (as of Nov. 10) despite USDA's reduction in production and ending stocks for both crops. In addition, weak wheat demand is cause for concern.
The soybean market has perhaps the most pessimistic price outlook, according to analysts, despite the significant reduction in the size of the U.S. crop. Underlying the gloomy outlook for soybeans is a forecast for record South American soybean production and news that October meal sales out of Argentina was about 400,000 tons larger than expected.
The latter, "shocked a lot of export traders," said grain analyst Dan Cekander. " It's an explanation as to why our meal export pace is so slow. As for our oil export sales, we had 38,000 tons last week, the lowest in the last 15 years for this time of the year. That's a very dismal pace. It's proving that in beans, demand is going to be a struggle. The market is going to be very vulnerable as long as the South American crop progress remains favorable."
The analyst figures that the current U.S. farm program will encourage U.S. producers to continue to expand soybean acres in 2001. That's more bad news for beans.
USDA pegged U.S. corn production at about 20 million bushels under the average trade guess in its Nov. 9 crop production report. But that was still within the range of expectations. "At 10.1 billion bushels, the crop is still disappointing for bulls," said market analyst Greg Grow. "You might see the corn market stumble a little bit."
Indeed, the futures market did record slight losses for corn, beans and wheat on the day of the report.
However, that USDA did not reduce U.S. corn exports in its supply/demand estimates was a surprise for Cekander and perhaps an indication of a more optimistic outlook for corn.
"I imagine that USDA elected to leave the export figures unchanged because we really don't know China's export sales policy for 2001 - if they back away from the market and only ship 4 million tons or less, the export forecasts are still attainable."
On the other hand, Cekander noted that there may not be a lot of upside to the corn market, "until we prove that there is some demand for the old crop. The new crop corn price has achieved a level that will at least stabilize corn acres."
U.S. wheat plantings are now at the lowest levels since the early 1970s, and wheat has had trouble finding buyers around the world for two years in a row.
Since the United States is a dependable provider and the wheat price is low, importers have tended to buy hand-to-mouth, according to Cekander, "letting us store the grain so they don't have to pay storage costs. The wheat market is going to struggle somewhat unless we have weather influences that create apprehension regarding yield or production."