As a result of larger estimated production for both crops, including a record 2.907 billion bushels of soybeans, forecast ending stocks are up from last month and are now pegged at 345 million bushels and 1.458 billion bushels, for soybeans and corn, respectively.
Fortunately, demand continues to be strong for both crops, particularly corn, noted Brian Bastings, a commodity research analyst with Advance Trading Inc. “Right now, the corn market is looking at record usage, nearly 9.9 billion bushels,” he said. “Eventually we’ll see the corn market bottom out and set the stage for going into next year, where the market will need to buy some corn acres to meet this demand.”
The record-setting U.S. soybean crop “is bearish,” Bastings added. “And we’re also looking at record production in Brazil and Argentina which will begin planting in the next couple of months.”
USDA dropped it estimate of U.S. soybean exports, primarily due to the anticipated competition from South America, according to Bastings. “But we’re still looking at a record consumption base for beans (2.8 billion bushels). And the market will put a tremendous emphasis on growing conditions in South America.”
While the short-term price outlook is negative, Bastings advised marketers to watch the export market in corn and soybeans and planting progress in South America for potential price movement.
Soybean prices still have some downside, Bastings said. “If November futures break below $4.50, there’ll be some downside from there. December corn has the potential to drift to the $2 level at the tail end of harvest.”
The USDA report “is also a signal for the producer to start declaring his loan deficiency payment. You want to take advantage of any cash movement to the downside.”
The big demand for beans and corn has also squeezed world stocks-to-use ratios for those crops, Bastings noted. “If you look down the road, particularly for 2002, you’re going to need another large corn crop, probably a bump up of 2-3 million more acres. That’s a bright spot.”
A wild card in the wheat, corn and soybean markets is the expectation that China will join the World Trade Organization, noted James Rooney, a trader and analyst with Rooney and Associates. “We have a great global demand base, but China can change that very quickly. So keep an eye on that this winter.”
Under the WTO, China would have to import significant tonnage of corn and soybeans, noted Bastings. “China is considering liquidating its current corn stocks prior to importing corn under the WTO. It could be a little negative for the United States, a swing of 100 million bushels.”