Melvin Brees
Farm Management Specialist
University of Missouri Extension




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April 27, 2001

Unless Something Happens!

What kind of production year and what prices will it bring for agriculture producers? Those questions came up in several individual and group discussions during the past week. Strong meat demand suggests a decent year for livestock producers--especially beef. Big crops and low prices present a disappointing outlook for grain producers. That essentially sums up what is expected for the year, unless "something happens." That "something," outside of foot and mouth disease, would most likely be weather problems in major crop production areas.

Most current forecasts are for normal weather and good production. After last year's forecasts of a drought that didn't happen and with few areas of dry soil concerns, average weather is expected to produce more than enough grain. After four of the largest U.S. soybean crops and another record coming from South America, the markets are more focused on large supplies and showing little concern for potential production problems. Could something happen to change this?

Some analysts are pointing out a few factors the markets seem to be overlooking. Soybean supplies are large, but so is use. In both of the previous two years, huge increases in ending stocks were expected early in the growing season. However, ending stocks for the '99-'00 crop ended up under 300 million bushels and the '00-'01 soybean ending stocks are now projected at 300 million. This is well below earlier predictions, by some, of 500 million bushels or more. The current estimate results in an ending stocks to use ratio of about eleven percent which is about average for the past ten years. This stocks to use ratio history suggests that soybean prices should be well above $5 instead of near $4. But the market continues to focus on adequate supply, large production and the potential for increased ending stocks.

The supply/demand situation for corn and wheat could change too. This year's corn use is still expected to be a record in spite of "StarLink" export problems. 2001 corn acreage is expected to decline and farmers in some areas of the Corn Belt are experiencing planting delays. Planting delays and/or summer weather problems could have significant impact on final production. It also appears that some of the HRW wheat crop is in poor condition, more acres will be abandoned and some spring wheat planting is being delayed.

Current market price action offers little hope for old crop (2000) corn and soybean prices. More than adequate grain supplies and record South American production are overwhelming strong use, resulting in disappointing corn prices and soybean prices near 28-year lows. Continuing to store old crop grain and hoping for higher prices appears to be "betting on summer weather"--usually a poor bet! New crop (2001) might be a different situation. With continued strong demand, unexpected weather problems could quickly tighten supplies and send prices higher. For now, the market loan or LDP provides price support protection. It's early in the market year and conditions may change. However, the most likely outlook remains large grain supplies and continued low prices--unless something happens! --Melvin

University of Missouri ExtensionDecisive Marketing - April 27, 2001 -- Revised: April 20, 2004