Outlook for Corn & Other Feedgrains 2003-04

By Dr. Robert WisnerIowa State University

World Production/use data sources: USDA

U.S. & World Crop ForecastsAugust 12, 2003

• U.S. Corn Crop 7 mil. m. t. below private forecasts

• U.S. corn 27 mil. t. above 2002• U.S. Soybean Crop 3.8 mil. t. below private

forecast• World Wheat & Feed grain Stocks tighten• Ukraine wheat crop –76% from 2002, feed gr. –

10%• Canada wheat –12% from July forecast• EU wheat –5% from July forecast• EU feed grain –7% from July forecast• E. Europe wheat –11% from July forecast, F. gr.

–5%

Fig. 1

Crop Conditions, % Good/Excellent7/14/03 8/3/2003 7/14/03 8/3/2003

Corn Soybeans

IL 76 79 70 73IN 52 59 51 58IA 85 78 81 76KS 67 22 68 26KY 66 63 67 74MI 69 70 69 69MN 82 75 79 72MO 67 37 62 38NE 78 57 74 50NC 65 75 65 69ND 77 75 80 74OH 55 62 51 57PA 60 68 N.A. N.A.SD 84 71 80 70TN 72 77 76 76TX 44 41 N.A. N.A.WI 82 76 80 78

18 Sts 74 67 70 63Yr. Ago 49 41 50 431994 86 85 79 80

Figure 4. Forecast & Actual U.S. Average Corn Yields

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

1987 1989 1991 1993 1995 1997 1999 2001 2003

Bu.

/A.

-6

4

14

24

34

44

Forecast Yield

Actual Yield

Error

Model based on % planted 3rd wk. of May, % good-excellent 3rd wk. of July, trend, 0/1 weather variable. R2 = .956

R. Wisner, ISU Economics Error, Bu/A.

Proj. 2003 8/05/03

Std. Deviation 3.14 bu./A.

3rd wk. Of July

Countries requiring GMO labeling 06/03

U.K.BelgiumFranceNetherlandsGermanyLuxembourgSwitzerlandDenmarkIrelandParaguaySloveniaSri Lanka

Greece Portugal Spain Sweden Finland Austria Poland* Australia New Zealand China Thailand Taiwan Malaysia

Italy S. Korea Japan Czech Rep. Hungary Saudi Arabia Japan Mexico Russia

Ethiopia South Africa

*Not enforced, but will be with EU entry

Hungary

8/12/03Fig. 11

Mil. Bu. Change in 2002 Corn Production vs. 2001 11/12/02

+240

+255

-76 -90 -160-238-212

-101

-38

+30

-49

+45+34

+32

+6+17

+16

+17+1

-3

-24

-29

-16

-17

-16

-49-16

U.S. -504814 below 2001-02 utilization

-43

Basis Implications?

N.C. Iowa Basis, Mid-Oct. Under Near-by futures

Corn• 1996 -.24• 1997 -.37• 1998 -.43• 1999 -.51• 2000 -.38• 2001 -.38• 2002 -.29• 2003 -.40 to-.45?

Futures 6/24/03

Corn

July $2.39

Sept. 2.35

Dec. 2.35

March 04 2.41

May 2.47

July 2.47

Sept. 04 2.40

Soybeans

July $6.30

Aug. 6.29

Sept. 6.00

Nov. 5.66

Jan. 04 5.68

March 5.70

May 5.69

Watch Carry for Storage Hedge Opportunities

78% of years, prices declined, 22% of years prices increased

Monthly Iowa Corn Price Declines, 1979-80 Through 1999-00 Marketing years

0%

10%

20%

30%

40%

50%

60%

70%

80%

Sep.-O

ct.

Oct.-N

ov.

Nov.-D

ec.

Dec.-J

an.

Jan.-F

eb.

Feb.-M

ar.

Mar

.-Apr.

Apr.-M

ay

May

-Jun

Jun-J

ul

Jul.-

Aug.

Aug.-Sep

.

Percent of time Prices Declined

Longer Run Trends• In early stages of rapid increase in

grain farm size• Rapid increase in use of semi-trucks• Shuttle trains• Designer crops ahead? Marketing

challenges• More consolidation of elevators• More ethanol plants: basis impact &

how to market DDGS• New grain contracts for farmers

http://www.econ.iastate.edu/faculty/wisner/

Geographical Corn Price Differences Early June 2003

2.42

2.43 2.47

2.62

3.053.00 Wheat

2.15 2.15

3.01 2.652.28

3.30

3.16

3.022.17

2.37

2.70

2.48

2.40

Grain Outlook, 2003-04

• Low U.S. & world reserve feed grain stocks • Tightening world wheat stocks• New global grain competitors crop outlook • With U.S. trend yield or higher in 2003

– Moderate drop in cash corn price, to moderately under loan rates

• Moderate potential price volatility through September if widespread adverse weather should develop

Have currencies recovered? % Chg. June 24,03 vs. Jan. 1996

S. Korea -52 Hong Kong -0.8 Japan -12 Malaysia -49 Indonesia -256 India -29 Argentina -181

China +0.1 Russia -551 Philippines -104 Taiwan -26 Thailand -65 Brazil -185 Mexico -41

EU Euro -8