Farmers’ hopes for higher feed grain prices were hammered earlier this week when the United States Department of Agriculture suggested there will be more than expected coming off U.S. farmers’ fields this year.
With the U.S. harvest beginning in many long-season states, the chance of significant production shortfalls is slipping away.
“This was the last hope for any bullish news, and we just didn’t get anything there,” said broker Ken Ball of Union Securities.
The prairie situation for feed grains is bad, with the North American glut piling up on top of a prairie crop that is growing with each wet and cool day.
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USDA’s August corn yield estimates are bearish
The yield estimates for wheat and soybeans were neutral to bullish, but these were largely a sideshow when compared with corn.
“We’re going to turn a lot of wheat into feed wheat and some malt barley might end up going to feed, and then when you add the corn number (from the USDA report) it’s not a very firm looking price picture at all.”
The USDA found more corn and soybeans than it predicted in its August report, but the wheat production estimate was not increased.
According to the USDA report, wheat prices are expected to weaken because of the glut of other crops such as corn.
The USDA report predicted the price of corn in the U.S. will range from $1.70 US per bushel to $2.10. Last year’s average was $2.06 per bu.
Soybean prices are also expected to be lower than last year, with a range of $5.15 US per bu. to $6.05, compared to last year’s $5.50 to $6.50.
The Brazilian soybean crop, which grows during the Canadian winter, is expected to be about 60 million acres, roughly two million acres smaller than last year’s. Ball said one of the lingering hopes for better oilseed prices this winter comes from early signs of problems in Brazil, both from dryness and from farmers’ likely minimization of expensive inputs.
“Commercial traders have already got an eye – one very closely focused eye – on South America,” said Ball.
But so far the bigger than expected U.S. crops are pressuring prices down.
The USDA said the 2005 corn crop in the U.S. will probably be 10.639 billion bu., which is substantially higher than its August estimate of 10.35 billion bu. and higher than trade expectations.
Soybean production was bumped up to 2.856 billion bu. compared to the August estimate of 2.791 billion.
Although the USDA report was considered bearish, corn prices fell only four cents per bu. by the close of trading on Sept. 12. At one point it had fallen 10 cents.
Ball said the relatively small price slump was not a sign of strength, but evidence that corn is already far down in the dumps.
“How much lower was it going to go?” he said.
