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The Agricultural Newsletter
from the Federal Reserve Bank of Chicago
Number 1887

April 1997

AgLetter
CROP REPORTS SIGNAL CONTRASTING
PRICE PRESSURES
Two recent reports from the U.S. Department of Agriculture contained divergent short- and long-term price signals
for corn and soybeans. The Grain Stocks report provided
an indication of the amount of corn and soybeans remaining from last fall’s harvest as of March 1. It also provided
a benchmark for gauging how much of the available supplies were used during the first-half of the marketing year
and, for soybeans, it provided a means of judging the accuracy of last fall’s harvest estimate. For both corn and
soybeans, the report tended to firm near term price prospects by signaling faster-than-expected use so far this marketing year. Conversely, the Planting Intentions report
foreshadows bigger-than-expected increases in 1997 corn
and soybean seedings. The indicated acreage, if supplemented by conducive weather conditions, could signal
ample supplies for both consumption and a rebuilding of
carryover stocks during the 1997/98 marketing year.
The March 1 grain stocks estimates provide a measure of consumption for the first half of the crop marketing year for corn and soybeans and the amount available
for either second-half consumption or for year-end
stocks that will be carried into the next marketing year.
The estimate of corn stocks was placed at 4.49 billion
bushels. That marked a large (18 percent) increase from
the extremely low stocks of a year ago but is still 9 percent
below the prior five-year average. For soybeans, the
March 1 stocks estimate was placed at 1.06 billion bushels,
down more than a tenth from both last year and from the
prior five-year average. Supplies remain relatively tight
in both the corn and the soybean market.
The March 1 estimate of corn stocks, when compared
to available supplies at the beginning of the marketing
year and the modest imports since then, implies that total
use of corn during the first half of the marketing year
was up 2 percent from a year ago and second only to the
record pace of two years ago. By residual calculation,
all of the rise was in domestic consumption. Trade figures
show corn exports during the six months ending with
February were down 17 percent from the strong year-earlier
pace. That implies domestic consumption of corn during

the same period was up 8 percent and, at 4.2 billion
bushels, close to the record pace of 4.3 billion bushels
consumed domestically during the first half of the 1994/95
marketing year.
Like corn, the March 1 estimate of soybean stocks
was lower than expected. But unlike for corn, regular
reporting channels track the bulk of domestic consumption, or usage, for soybeans. Consequently, the lowerthan-expected estimate of soybean stocks may imply that
the supplies available at the beginning of the marketing
year were overstated because of a slightly inflated estimate
of the 1996 soybean harvest. At any rate, the available
reports show that usage of soybeans during the first half
of the marketing year was at a record-setting pace. Soybean exports were up more than a fifth from the year
before while the amount of soybeans crushed into meal
and oil domestically was up 7 percent.
The strong first-half consumption patterns and the
lower-than-expected stocks prompt a reassessment of
likely developments during the remainder of the 1996/
97 crop marketing year. Updated projections from the
U.S. Department of Agriculture raised the estimates of
total use of corn and soybeans and lowered the estimates
of ending stocks. Corn usage during the second half of

Tight supplies will slow soybean usage during
last half of the 1996/97 marketing year
billion bushels
2.5

2nd half
1st half
2.0

1.5

1.0

0.5

0.0
1989/90 90/91

91/92 92/93 93/94 94/95
marketing year ending August

*Preliminary for first half; projeced for second half.

95/96

96/97*

the marketing year is expected to hold well above last
year’s curtailed level while lagging further behind the
record pace of two years ago. Export prospects have
been trimmed because updated tallies show China’s
return to a net-exporter position in corn this year will be
more profound than had been forecast earlier. Moreover,
Taiwan’s import needs for livestock feed have been reduced
because of the disease that recently has riddled its pork
sector. The estimate of corn exports for the entire marketing year was cut from 1.90 billion bushels to 1.82 billion
bushels. This implies shipments during the March-August
period will be down nearly a fifth from last year and no
better than the average of the five prior years. Domestic
use during the second half of the marketing year will
remain high and well above the levels of a year ago
when usage was trimmed by low supplies and recordhigh corn prices. Compared to the prior five-year average,
however, the second-half gain in domestic use will narrow considerably from the first-half performance. These
projections assume carryover stocks of corn at the end of
the 1996/97 marketing year will approximate 900 million
bushels. Such a level is about 50 million below the previous forecast and very low by most historical comparisons. However, it is more than double the precariously
low carryover stocks of a year ago.
Prospects for soybeans in the months ahead are
clouded by the contrasting trends of very tight domestic
supplies and an apparent bumper harvest now underway
in the Southern Hemisphere. Despite some late-season
drought damage, the combined soybean harvest now
coming out of Brazil, Argentina, and Paraguay is still
projected to be a record high and some 8 to 11 percent
larger than last year. Rumors continue that some of
those soybeans could be shipped to the U.S., a development that has helped to blend the relatively high prices
here to lower prices there in the face of strong world
demand. Regardless of the import developments, carryover stocks of soybeans at the end of the current marketing
year will be pulled to a minimal level. The USDA now
projects soybean carryover stocks will fall to a 20-year
low of 125 million bushels, down from the previous estimate of 140 million bushels. Relative to annual usage,
the ending stocks would be as tight as was the case for
corn last year and the tightest for soybeans in 25 years.
The projected ending stocks figure for soybeans
implies second-half usage will retreat 8 percent below
last year’s pace, abruptly reversing the first-half gain
of 14 percent. The Southern Hemisphere harvest now
becoming available to world markets implies all the cut
will be in soybean exports. The turnaround in exports
seems underway as weekly shipments since late February

and export orders on the books as of April 10 both show
declines with respect to a year ago. Domestic crushing
activity during the second half of the year is projected
to hold at last year’s somewhat curtailed pace as larger
inventories of poultry and cattle in feedlots help sustain
domestic meal demand.

MORE CORN AND SOYBEAN ACREAGE
While tight old-crop supplies will help buoy corn
and soybean prices in the short-run, larger plantings may
undercut prices later this year. A survey of farmers’
planting intentions points to another increase in corn
and soybean seedings this year but little change in the
total acreage of major crops. At 81.4 million acres, the
intended corn plantings would mark an increase of nearly
2.5 percent from last year and a 14 percent rise from two
years ago. Soybean seedings are expected to cover 68.8
million acres, up a surprisingly large 7 percent from last
year and 10 percent more than two years ago. These
intentions, if realized, would translate into the largest
corn acreage since 1985 and the largest soybean acreage
since 1982.
The planting intentions survey was conducted in
late February and early March, prior to when most of the
recent price gains for grains and oilseeds were posted.
Various factors through the planting season—including
crop price relationships, input supplies, and weather
patterns—could cause actual plantings this year to depart
from the reported intentions. Reflecting this, actual corn
plantings have fallen short of intended plantings in seven
of the last ten years. The average shortfall in those seven
years was 2.1 percentage points. The biggest shortfalls
occurred with the flood conditions in 1993 (4.3 percent)
and the late planting season in 1995 (5.4 percent). The
deviations from intended corn plantings in the other
eight years—both plus and minus—averaged less than
1 percent and never exceeded 2 percent. For soybeans,
actual seedings have exceeded intended plantings in
eight of the last ten years, including the last six in a row.
The deviations of the past ten years—both plus and
minus—for soybeans have ranged from a low of 0.9 percent
to a high of 3.6 percent and averaged 2.1 percent. In general, the acreage indications for corn and soybeans have
been the most reliable of the major crops covered by the
planting intentions survey.
Some 16 crops are covered in the survey of farmers’
planting intentions. The survey found that the total area
devoted to those crops this year is expected to approximate 330 million acres, down only nominally from the
high level of last year. However, because of heavy acreage
abandonment last year, especially in the winter wheat areas

Farmers’ planting intentions point to more corn
and soybean acreage, less wheat
1994

1995

1996

1997

Change

(- - - - - - - - - - -million acres- - - - - - - - - - -)

(%)

100.2
79.2

90.4
71.2

102.5
79.5

102.5
81.4

0.0
2.4

Wheat
Spring

70.3
21.2

69.1
20.4

75.6
23.7

69.2
21.0

-8.5
-11.4

Soybeans
Sunflower

61.7
3.6

62.6
3.5

64.2
2.6

68.8
3.1

7.2
19.8

Hay b

58.7

59.6

61.0

61.5

0.8

2.0
1.5

2.1
1.4

1.8
1.4

1.9
1.5

5.6
6.4

Cotton
Rice
Peanuts
Otherc

13.7
3.4
1.6
0.9

16.9
3.1
1.5
0.9

14.7
2.8
1.4
0.9

14.5
2.9
1.4
1.1

-1.2
2.2
-1.2
18.8

Total

317.6

311.2

329.0

328.3

–0.2

Feed grainsa
Corn

Dry beans
Sugar beets

a

Uses harvested acreage for oats.
Harvested acreage.
c
Combines tobacco (800 thousand acres), flaxseed (200 thousand acres),
and sweet potatoes (90 thousand acres) for 1997.
Source: U.S. Department of Agriculture.
b

hard-hit by drought, the intended seedings this year
could translate into a slightly larger harvested acreage.
Despite prospects for more corn, total feed grain
acreage this year may be unchanged from the four-year
high set in 1996. Sorghum acreage, which jumped nearly
40 percent last year as many farmers with drought-withered
winter wheat tried a second crop, will decline nearly a
fifth this year if the planting intentions survey proves
to be reliable. Intended barley seedings also point to a
modest decline from last year, but the area seeded to oats
(and intended for harvest) could rebound considerably.
Total wheat seedings for this year’s harvest are now indicated to be down 8.5 percent to 69.2 million acres. The
11-percent cut for spring wheat seedings indicated in the
most recent survey was larger than most analysts expected
and larger than the 8.5 percent cut reported earlier for
the winter wheat acreage that was seeded last fall. Cotton
and peanut acreage may also edge lower this year, based
on the planting intentions reported. Conversely, gains of
1 to 2 percent are indicated for rice and for hay. Somewhat
larger gains, 6 to 10 percent, are suggested for dry edible
beans, sugarbeets, and tobacco. Planting intentions for
sunflowers point to a 20 percent rise while those for flaxseed foreshadow a doubling.
Among the states comprising the Seventh Federal
Reserve District, four crops—corn, soybeans, hay, and
wheat—account for virtually all the acreage covered by

the survey. Based on the reported planting intentions,
the acreage devoted to those four crops in District states
will be up 1 percent from last year and 6 percent larger
than two years ago. A sizable cut (23 percent) in wheat
acreage this year will nearly offset modest gains for the
other three crops. Intended corn seedings for the fivestate region point to a 1 percent rise as gains for Illinois,
Indiana, and Wisconsin exceed the slight cuts indicated
for Iowa and Michigan. Soybean planting intentions
point to larger seedings in all District states except Indiana,
with a 3 percent rise indicated for the five-state region.
Hay acreage is indicated to be up 1 percent, with all the
rise occurring in Illinois and Indiana.
While the indicated planting intentions provide
added information about the potential 1997 crop harvest,
weather patterns during the planting and growing season
will remain a key variable as to the final outcome.
The indicated acreages for corn and soybeans are large
and add to the potential that this year’s harvest will lead
to a rebuilding of carryover stocks for both crops. The
indicated corn plantings, based on a normal relationship
between planted and harvested acreage and a trend-yield
per acre would produce a harvest of about 9.6 billion
bushels. But the harvest could range from 8.7 billion
bushels to nearly 10.4 billion bushels, depending on
whether this year’s per-acre yield more closely approximates the ten-year average or the record high. This wide
range of the potential harvest must be weighed against
likely trends in consumption or usage. The all-time high
in corn usage was 9.4 billion bushels which occurred
during the 1994/95 marketing year of relatively low corn
prices. Usage during this year of relatively high corn
prices is projected to reach 8.8 billion bushels, the second
highest on record.
For soybeans, the planting intentions foreshadow
a harvest ranging between 2.35 billion bushels and 2.81
billion bushels, depending on whether yields approximate the 10-year average or the all-time high. So far, the
all-time high in annual usage of soybeans was 2.40 billion
bushels during the 1994/95 marketing year. A new record
high of around 2.45 billion bushels will likely be posted
when final results of the current marketing year (ending
in August) are calculated.
For both corn and soybeans, tight old-crop supplies
will keep the market closely attuned to this year’s harvest
prospects. Any major weather threats to this year’s harvest
could sustain the recent buoyancy in crop prices. Alternatively, prices this summer could erode sharply if crops
seem to be developing up to their potential.
Gary L. Benjamin

SELECTED AGRICULTURAL ECONOMIC INDICATORS

Percent change from
Latest
period

Value

Prior
period

Year
ago

Two years
ago

Prices received by farmers (index, 1990–92=100)
Crops (index, 1990–92=100)
Corn ($ per bu.)
Hay ($ per ton)
Soybeans ($ per bu.)
Wheat ($ per bu.)
Livestock and products (index, 1990–92=100)
Barrows and gilts ($ per cwt.)
Steers and heifers ($ per cwt.)
Milk ($ per cwt.)
Eggs (¢ per doz.)

March
March
March
March
March
March
March
March
March
March
March

108
119
2.78
108.00
7.95
3.96
98
49.20
67.70
13.60
71.8

2.9
5.3
4.9
2.9
7.7
2.1
0.0
–7.2
3.8
0.7
–5.2

–1
–8
–21
35
14
–22
5
–1
12
–1
–11

9
11
21
29
44
12
5
29
–4
8
17

Consumer prices (index, 1982–84=100)
Food

March
March

160
157

0.3
0.1

3
3

6
6

Production or stocks
Corn stocks (mil. bu.)
Soybean stocks (mil. bu.)
Wheat stocks (mil. bu.)
Beef production (bil. lb.)
Pork production (bil. lb.)
Milk production* (bil. lb.)

March 1
March 1
March 1
February
February
March

4,494
1,056
822
1.92
1.31
11.5

N.A.
N.A.
N.A.
–13.6
–10.4
11.8

18
–11
0
–6
–8
0

–20
–23
–15
6
–3
0

Receipts from farm marketings (mil. dol.)
Crops**
Livestock
Government payments

December
December
December
December

18,856
10,485
7,849
522

–8.3
–16.3
–1.7
832.1

6
3
3
561

7
–1
21
12

Agricultural exports (mil. dol.)
Corn (mil. bu.)
Soybeans (mil. bu.)
Wheat (mil. bu.)

January
January
January
January

4,997
183
106
65

–4.8
–2.8
–12.9
21.7

–10
–15
0
–33

12
–4
19
–33

Farm machinery sales (units)
Tractors, over 40 HP
40 to 100 HP
100 HP or more
Combines

March
March
March
March

6,786
3,720
3,066
400

23.5
23.1
24.1
25.4

14
10
18
–13

7
13
0
–24

N.A. Not applicable
*20 selected states.
**Includes net CCC loans.

AgLetter is printed on recycled paper
using soy-based inks

Federal Reserve Bank of Chicago
Public Information Center
P.O. Box 834
Chicago, Illinois 60690-0834
312-322-5111

AgLetter

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