08/04/04, Southeast Farm Press - While acreage, demand and weathercontinue to dominate the news in the corn and soybean markets, oneinteresting sidebar is what will happen when and if the United States runsout of soybeans before the new crop becomes available.

According to USDA, soybean stocks as of June 1 were estimated at 410million bushels. While the number, announced June 30, was about 15 millionto 20 million over the average expectation, "It's still not a big cushionfor the remaining three months of this crop year," said Gerry Gidel, ananalyst with Midland Research, during a Chicago Board of Trade pressbriefing.

"We still have a very strong need for supplies until about mid-Septemberwhen we have an adequate amount of new crop supplies in the South into thesystem."

Joe Victor, vice president/marketing, Allendale Incorporated, said runningout is just a matter of when. "At an average fourth quarter usage of 469million bushels, we would have a negative 59 million bushels by the end ofthe year."

But Victor believes that crushing facilities will shut down when soybeanprices become too unprofitable for them to crush beans and/or whensupplies run out. At that time, "we don't look for beans to be coming intothe United States, we look for meal to be coming into the United States.

"So I would caution people with old crop beans because eventually they aregoing to end up being new crop beans. I wouldn't wait around foreverthinking you're going to get a gold mine on Sept. 1.

"Longer-term, new crop beans might not have much of a post-harvest rallyif we have any kind of better weather in South America," Victor added."USDA has them up there with some really unbelievable numbers.

"So I would urge soybean producers to not get too optimistic," Victorsaid. "Even with the smaller acreage in the United States, we're going tohave more than adequate beans on a worldwide basis. For new crop beans, $7is probably a practical top. Downside risk in new crop beans is definitelyunder $6, possibly in the $5.50 area."

According to USDA's June 30 acreage report, U.S. farmers planted 74.8million acres of soybeans this spring, down from the March estimate of75.4 million acres. U.S. farmers also planted 80.9 million acres to corn,up from the March estimate of 79 million acres, and 59.8 million acres towheat, up from the March estimate of 59.4 million acres.

USDA's estimate of corn acres was 700,000 acres to 1 million acres overthe average trade expectation, with increases in Illinois, Iowa, Minnesotaand Nebraska. At least some of the increase in corn acreage is from a 1.4million-acres decline in grain sorghum acreage from last year.

With higher acreage in corn, there is now less importance on whether ornot growers achieve trend-line yields, according to Gidel. "But weather atpollination will still be big market factor."

Victor doesn't anticipate significant changes to either soybean or cornacreage in subsequent USDA reports. "With 80 million acres of corn, 91.5percent harvested acres, and trend yields of 145 bushels per acre, you'relooking at 10.74 billion-bushel crop. A 10.5 billion-bushel usage willgive you projected end stocks for 2004-05 of approximately 950 millionbushels."

However, "according to NASS, 20 percent of the 18 major producing stateshave a moisture index that is excessively wet or flooded. We thinkharvested acreage should be taken down another 3 percent."

Corn demand is still quite strong, noted Gidel. "We had the thirdconsecutive record for quarterly use of corn this year. Even though we'llsee sales slow down, it's not going to take much to spark interest in U.S.corn, especially with the lack of competition from China."

Gidel expects prices for corn to range from a low of $2.54 December to $3to $3.10. "From a global perspective, usage still outpaces production forwheat and corn. Here in the United States, the market will be morebasis-sensitive than futures-sensitive."

He sees a price range for soybeans of $6.40 to $6.60 on the low side and$7 to $7.50 on the high side. "Let's remember where we were about a yearago. The crops looked great, then someone turned the water off in August.But with a reduced acreage number now versus March, some potential fordryness, and ending stocks of 115 million bushels, all it will take is twoto three weeks of drier than normal weather and the market will explodeagain."