The analysts discussed market implications of USDA’s November crop production report and supply/demand estimates at a press briefing at the Chicago Board of Trade. The crop production report estimated U.S. soybean production at 2.69 billion bushels, up from last month’s 2.654 billion bushels and down from last year’s 2.891 billion bushels.

The agency estimated U.S. corn production at 9.003 billion bushels, up from last month’s total of 8.97 billion bushels and down from last year’s estimate of 9.507 billion bushels.

Ending stocks for soybeans was estimated at 185 million bushels, up from last month’s estimate of 175 million bushels, but down from last year’s 208 million bushels. Ending stocks for corn were was estimated at 848 million bushels, up from last month’s estimate of 764 million bushels and down from last year’s 1.599 billion bushels.

Wheat’s ending stocks figure was 358 million bushels, down from last month’s estimate of 371 million bushels and down from last year’s 777 million bushels.

Domestic demand for corn will be off a bit next year “but we’re looking at roughly the second smallest carryover for corn in the last 27 years,” said Tim Hannagan, a grain analyst with Alaron Trading. “The market is going to want to ration that.”

Meanwhile, soybean supplies are low “at a time when we have an awful lot of demand surfacing due to edible oil supply problems all around the world,” Hannagan said. “Canola out of Canada, rapeseed out of Australia, the palm oil crop, everything is hurting and the Asia markets are mandating more protein in the diet, and they’re not going the way of livestock to get it.

“We look for soybean demand to be very strong and this 185 million bushel carryover is going to have to be rationed. It’s all about demand.”

Crop progress reports are expected to indicate that most of the U.S. corn and soybean crops are now harvested, Hannagan noted. “In corn, we have less than 10 cents risk from here on out.” Hannagan projected corn prices “18 cents to 26 cents on the upside from here going into the first quarter.”

A negative is that China has been an aggressive seller of corn, up 78 percent as of Oct. 1.

“China has effectively replaced the United States the last three years as a supplier of grain to South Korea, Malaysia and Indonesia.”

China’s demand for soybeans should continue, at least until mid-January, 2003. “They’re already talking about increasing crushing capacity by 20 percent next year. For soybeans, everything is positive from a demand side, regardless of the supply.”

Hannagan projects soybean prices of $6.18 to $6.36 on the upside unless bad weather out of South America pushes prices higher. “But after Jan. 15, if weather is good in South America, look for China to start canceling pre-arranged sales from the United States.”

“I think $6.25 is a reasonable objective, just based off demand alone,” added Jack Scoville, vice president, Price Futures Group. And things could get more interesting.

“South America has had some problems getting their crop in,” the analyst said. “It’s been too dry in northern Brazil and too wet in southern Brazil, which has hurt the planting pace. So there is some potential to see production estimates for corn and soybeans out of South America to get trimmed as we move into the growing season. That would add price support for both commodities.”

The corn market is not quite as promising, according to Scoville. “If we get strong demand from here, we could try to make a run back up to $2.80 to $2.90, but it would be difficult. If you haven’t got some corn sold during the first quarter of next year, you definitely want to get some sold.”

Hannagan added that world ending stocks for soybeans did creep up, according to USDA estimates, which will also keep soybean prices from heading too high.

Still, heady marketers should keep an eye on the weather in South America, according to Hannagan. “El Niño has been in existence since the first week of June. It’s bringing rain to the southern areas and not to the northern areas. It could get very exciting. Hold on to the beans.”

e-mail: erobinson@primediabusiness.com