Corn+Soybean Digest

Time To Look (Way) Ahead

Last year at this time, there was more than a little evidence that 1998 corn and bean markets would be dominated by the bears. Corn growers were prepared to up acreage by about 1%, and bean growers were readying for a similar percentage increase over 1997 levels. The market wasn't prepared to absorb those acreage gains.

El Nino is one reason. The crop-positive and price-negative weather patterns stayed in the Midwest long enough to generate above-average yields in most areas. And early season monsoon-like rains in the eastern Corn Belt turned expected conservative gains in soybean acreage into a burdensome 2.7% increase over the '97 figure.

The combination of increased acreage and above-average yields in '98 took 1998-99 marketing year carry-in to burdensome levels.

The Sept. 30 Quarterly Grain Stocks Report pegged 1997-98 soybean carryover at 199.8 million bushels. That's a known number, and USDA won't adjust the carryover estimate from this point forward making the '97-98 marketing year old news.

So it's time to look forward to the 1998-99 marketing year - a year in which carryover is expected to more than double. That expected doubling of stocks is exactly why the low bean prices in early September '98 tested support levels established a decade ago.

Pro Farmer isn't quite as pessimistic on the outlook as is USDA, putting estimated '98-99 bean carryover at 465 million bushels. That's 20 million bushels less than USDA's September estimate. Reason: Combines will roll over plenty of zero-yield areas in fields in the eastern Corn Belt, potentially pulling the national average yield down slightly from the 40.6 bu/acre estimated by USDA as of Sept. 1. Also, Pro Farmer estimates that another 10 million bushels of soybeans will be exported during the marketing year.

The bottom line on the '98-99 marketing year: Bean carryover will at least double from year-earlier levels. So, the market will have a tough time posting significant gains and even a weather-based rally won't have much pop.

Because expectations of a 100%-plus increase in 1998-99 bean carryover had a tremendous negative influence on 1997-crop marketing opportunities, it's necessary to look out to the 1999-2000 marketing year to gauge its potential impact on '98-crop marketings. Unfortunately for soybeans, another substantial increase in carryover is likely.

Because bean acres were added in 1998 by the late planting season, Pro Farmer expects basically steady bean plantings in 1999. However, there is a chance of an increase in bean acres because of the poorer corn price outlook.

Excellent growing conditions in 1999 could bring another 50% increase in U.S. carryover. But the big increase in carryover isn't set in stone. La Nina has the greatest potential impact on the bean market, and a drought-reduced South American crop would send the world to the U.S. for supplies.

Bottom line: Move quickly to market the '98 crop on a basis recovery. Also, be ready to start your '99 marketing early. If basis stinks, use futures and/or options to cover risk. If basis narrows, use cash sales even before planting.

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