Grainnet

The U.S. Department of Agriculture, in its September Crop Production Report this morning, predicted a huge increase in the U.S. soybean crop over August estimates and a sizeable increase in the size of the corn crop.

The USDA soybean estimates boosted production by 6% over the August prediction. In a teleconference from the floor of the Chicago Board of Trade this morning, James Barnett, oil and seed analyst for Man Financial, Chicago, IL, said that was the largest increase from the August to the September crop reports in history.

Here are the numbers from USDA.

CORN -- Corn production is forecast at 11.1 billion bushels, up 1% from last month and fractionally above 2005.

Based on conditions as of Sept. 1, yields are expected to average 154.7 bushels per acre, up 2.5 bushels from August and 6.8 bushel from last year.

If realized, yield and production would be the second largest on record, behind 2005.

U.S. ending stocks are lowered to 1.2 million bushels, down 12 million.

The 2006-07 marketing year average price is unchanged from last month at $2.15 to $2.55 per bushel.

SOYBEANS -- Soybean production is forecast at 3.09 billion bushels, up 6% from the August forecast and up slightly from the 2005 crop.

If realized, this would be the second highest production on record.

Based on Sept. 1 conditions, yields are expected to average 41.8 bushels per acre, up 2.2 bushels from August but down 1.5 bushels from last year's record high yield.

Ending stocks are projected at 530 million bushels, up 80 million from last month.

U.S. season-average soybean prices for 2006-07 are projected at $4.90 to $5.90 per bushel, down 10 cents on both ends of the range.

WHEAT -- All wheat production is pegged at 1.801 billion bushels, with an average yield of 38.3 bushels per acre.

Ending stocks for 2006-07 are projected lower at 429 million bushels.

The projected price range is tightened 5 cents on both ends to $3.95 to $4.45 per bushel.

Analysis

Brian Basting, analyst with Advance Trading Inc., Bloomington, IL, called the current corn market "one of the most dynamic I've ever seen."

While the huge crop and carryout might suggest extremely depressed prices, he said, that is at least partially offset by increased demand in both export markets and for ethanol.

He noted that China no longer is exporting corn, and USDA has predicted that the Chinese will import some 32 million metric tons (MMT) this year.

Joe Victor, vice president of marketing for Allendale Inc., McHenry, IL, said that the short-term effect of the crop report is slightly bearish, possibly delaying the harvest low in prices by a couple of weeks.

However, the overall demand picture is bullish in the long term, and Victor predicted that July corn futures could reach as high as $3.60 per bushel by late winter or early spring.

While the overall price trend on soybeans is down, the key to how low prices will go remains with the amount of acreage of soybeans planted, with planting season soon to get underway in South America.

Weather is uncertain in the growing regions of Brazil and Argentina and currently is becoming less favorable for soybean planting.

Victor predicted that November soybean futures could bottom out at $5.05 to $5.15 per bushel, while Basting was slightly more optimistic at $5.20.

Analysts said the primary story in wheat is that stocks are remaining tight worldwide. The September report is not a major report for U.S. wheat.

Ample rains in August and early September are largely responsible for the big production increase in the soybean and corn crops, but there is a possible dark side this fall, according to Chicago meteorologist Greg Soulje.

The wet pattern is expected to continue through the fall, he said, with major weather systems passing through the Plains and Corn Belt regions "every 72 hours."

The result could be frequent harvest delays, lengthening the fall harvest through October and November.

That's more typical of harvest seasons 20 years or more ago -- in recent years, lightning-fast harvests running about six weeks have been more the norm in the Midwest.

Basting commented that the biggest problem with a drawn-out harvest is that crop quality often deteriorates the longer it sits out in the field.

Looking out further, Soulje said a mild El Nino pattern appears to be setting up in the South Pacific.

That translates into a wetter winter in the Midwest and ample snow cover, particularly in the northern and western reaches of the Corn Belt.

He added that predictions of an extreme winter are probably exaggerated, but this will be more of an "old-fashioned" Midwestern winter than the relatively mild winters experienced recently.

See Related Websites/Articles:

• USDA September Crop Production Report
• USDA September World Agricultural Supply/Demand Estimates

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