Crop markets continue to be heavily influenced by the prospective size of the U.S. corn and soybean crops, with the USDA’s Sept. 12 Crop Production report to provide an important update on prospective crop sizes.
“With prospects for very small crops, the potential strength of export demand for wheat, corn, and soybeans is of increasing importance as crop problems have also been experienced in other parts of the world,” said University of Illinois agricultural economist Darrel Good.
Good said U.S. wheat is not in short supply due to the 13.5 percent increase in production this year. Because exports account for about 50 percent of the consumption of that crop in most years, however, demand in that sector is important for determining prices. The USDA has projected 2012-13 marketing-year exports at 1.2 billion bushels,150 million more than exports of last year. U.S. exports are expected to benefit from the 6 percent decline in production in the rest of the world. In particular, the sharp declines in production in Russia and Kazakhstan are expected to reduce combined exports from those two countries by nearly 650 million bushels this year. The market continues to expect some export restriction to be announced as a result of smaller supplies in that part of the world.
“Through the first 12 weeks of the current marketing year, U.S. wheat exports and export sales lagged the pace needed to reach the USDA projection for the year,” Good said. “Both shipments and new sales, however, were relatively large during the last week of August, exceeding the average weekly pace required to meet projections. With ongoing concerns about available supplies in the Black Sea region, recent large purchases by Egypt, and prospects for a smaller crop in Australia, there is renewed optimism that U.S. exports can reach, or perhaps exceed, the USDA projection. Those prospects would be bolstered by any export restrictions from the Black Sea region,” he said.
For corn, the 2011-12 marketing year ended on a very weak note for exports.
“Based on Census Bureau estimates through June and export inspection estimates through Aug. 30, it appears that marketing year exports will total about 1.535 billion bushels, 15 million below the already very small forecast of 1.55 billion,” Good said. “The USDA has forecast 2012-13 marketing-year exports at 1.3 billion bushels as exports will be limited by the small U.S. crop, the 25 percent increase in the Brazilian corn harvest earlier this year, prospects for larger feed-grain crops in Canada and Mexico, and smaller imports by China. U.S. exports may receive some support from smaller crops and reduced exports from Russia and the Ukraine. The size of the 2013 corn crops in South America will be important for U.S. export prospects during the last half of the marketing year,” he said.