Melvin Brees
Farm Management Specialist
University of Missouri Extension

 

 

 

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Please send your comments and send suggestions to Melvin Brees, Farm Management Specialist, University of Missouri Extension, #1 Courthouse Square,  Fayette, MO 65248, call 660-248-2272, or send messages by e-mail to: breesm@missouri.edu.
March 10, 2000

Almost Anything Could Happen!

Last week, we looked at USDA and FAPRI (Food and Agriculture Policy Research Institute) 2000-01 crop production and prices assuming average weather. Several private market analysts and newsletters have also prepared supply and demand projections for the new crop year. Several include scenarios for good, average and poor weather conditions. Comparing some of these private forecasts to the USDA and FAPRI baselines provides clues to just how volatile prices might be.

Nearly everyone expects more soybean acreage and about the same corn acreage as 1999. USDA projects 75 million acres planted to soybeans, up over one million acres this year (2000). From this, everyone projects about 74 million acres to be harvested. They nearly all agree that planted corn acreage will be about 77 million acres with 70 to 71 million harvested for grain. The USDA Planting Intentions Report, later this month, will either confirm these estimates or suggest changes. There is also very little variation in demand expectations in all of the forecasts.

The real questions are the effects of weather on yields and how that would impact on prices. USDA and FAPRI's average weather yields were about 40 bpa for soybeans with an average price of about $4.25. The private analysts' forecasts are for somewhat lower soybean yields with average weather--ranging 36 - 39 bpa. They are more optimistic on prices, averaging about $4.88 (range $4.60 - $5.30). With average weather, everyone expects corn yields in the range of 130 - 135 bpa. USDA and FAPRI expect average corn prices of $1.85 and $2.05 respectively. The private analysts are again more optimistic, expecting about $2.25.

Good weather could produce soybean yields of over 41 bpa and corn yields near 140 bpa. These yields would cause significant increases in supplies and ending stocks. According to the private analysts, this would result in average soybean prices under $4.50 with guesses as low as $4.20! Average corn prices would be about $1.90 and possibly as low as $1.75.

The greatest market concern has been what happens if the weather stays dry? The poor weather projections reduce soybean yields to about 35 bpa (a 6-bpa decrease from the good weather scenarios). This would result in reduced ending stocks and a wide range of price expectations. They estimate average prices anywhere from $5.50 to $6.70! Their "poor weather" corn yields vary somewhat ranging 118 to nearly 127 bpa. This could result in corn prices of $2.50 to $2.80.

Summing up, these projections point to a lot of price risk. Corn prices, under these various weather scenarios, could range from $1.75 to $2.80. Soybeans could be as low as $4.20 or maybe over $6.70. That's a potential range of $1.05 for corn prices and $2.50 per bushel for soybeans! That's in addition to production risk. It continues to emphasize the need for strategies to avoid low prices. It also suggests using a combination of marketing tools to insure flexibility under changing conditions. It's a challenging situation, but volatile markets can offer profit opportunities.

-- Melvin


University of Missouri ExtensionDecisive Marketing - March 10, 2000
http://outreach.missouri.edu/agconnection/DCT/DM000310.html -- Revised: April 20, 2004
breesm@missouri.edu