2003-04 Feedgrains Market Outlook

Bigger crops, rising use, and slightly higher stocks, weighed by record corn production expected in Brazil

USDA’s 2003/04 outlook for U.S. feed grains is for bigger crops, rising use, and slightly higher stocks.

The 2003/04 corn yield in July was raised 3 bushels per acre to a record 142.7, based on trend yields adjusted up to reflect excellent growing conditions.  Some analysts predict that number could be even larger. U.S. corn production is forecast to be about 10.27 billion bu, which would be a record, and well above production of a year earlier.

The supply increase is expected to be offset partially by an increase in total corn utilization, which is expected to be 9.95 billion bu, up from 9.61 billion bu from a year ago.  Exports are expected to rise only modestly, but record ethanol production is expected.  Still, the 2003/04 stocks-to-use ratio is currently projected at 13.5%, up from 10.5% the previous year.

Weighing on the feedgrains market is record corn production expected in Brazil in 2002/03, with much of it marketed during the 2003/04 October-September international marketing year. High prices and government programs encouraged area expansion, and generally favorable weather ensued, producing a corn crop that is expected to exceed the previous record by 2 million tons. With increased production, Brazil is expected to build stocks and increase exports. The Chinese are also expected to be a factor in the export market.

The combination of a record corn crop, coupled by lackluster exports and competition from Brazil and China, has USDA projecting prices in the $1.90-$2.30 range for 2003/04, compared with $2.25-$2.35 in 2002/03. Feed grain prices should be pressured most at harvest, then rise, but only modestly; 10-15 cent rallies should be considered for sales, says NDSU crops economist George Flaskerud.

Corn growers with a marketing plan in place should have had about one-third of their crop already sold, says Flaskerud. Complete sales on 10-15 cent rallies using a hedge or hedge-to-arrive (futures fixed) contract in July futures, and plan delivery for June.

An LDP could be available at harvest; if so, the window may not last long. The peak opportunity for an LDP should occur during the corn harvest.

World Coarse Grain Stocks Tight But U.S. Adequate
Ending Stocks of Coarse Grain Relative to Total Use

CBT December Corn Could Trade Under $2.20 in October
Average October Price December Futures Vs. USDA’s October S/U Estimate for Corn

Corn 2003-04
USDA July 03 S/D Report
 

Planted ----------------------79.1

Harvested -------------------72.0

Yield -----------------------142.7

Beg. Stocks ----------------1,009

Production ----------------10,270

Imports -----------------------10

Supply --------------------11,289

Domestic -------------------8,100

Exports ---------------------1,850

Use -------------------------9,950

Ending Stocks --------------1,339

S/U Ratio -------------------13.5%

Target November for Barley Sales
Minot Barley Prices