View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

Federal Reserve Bank of Chicago - -

S
May 17, 1974
CROP PRICE FLUCTUATIONS have closely
paralleled weather and export developments in recent
weeks. A weakening export market and an upwardrevised estimate for U. S. winter wheat production
combined to drop wheat prices to about half their
February highs. The drop in prices was coupled with
reports that farmers were ahead of schedule in spring
plantings and tended to depress the prices of other
grains and soybeans.
Corn and soybean prices reversed their downward trend briefly on the strength of the U. S. Department of Agriculture's Grain Stocks report indicating
that April 1 stocks of both crops were less than anticipated. As a result, the corn carryover estimate for
the end of the marketing year was lowered to 453
million bushels, the smallest since 1952 and equal to
about a three- to four-week supply based on current
disappearance rates. The estimated carryover of
soybeans was lowered to 200 million bushels, over
three times the previous year's level.
Crop Prices Decline From Previous Highs*
Dollars per bushel
• 7.00
Soybeans
6.00
5.00
Wheat
4.00
3.00

Jan.

Feb.

Mar.

Apr.

May

*Week ending Chicago prices.

Reports that farmers were far ahead of usual
spring planting schedules tended to depress prices
somewhat early in May. Corn plantings in Iowa were
72 percent complete at the beginning of this week. The
five-year average for mid-May is a 58 percent completi o n rate. On the same date last year, only 18 percent of
corn plantings were completed in Iowa. In Illinois,
plantings were just under the halfway mark, slightly
ahead of the normal rate but well ahead of last year.
Relatively heavy rainfalls throughout the Corn Belt in
recent days caused most crop prices to rise.
World crop production developments remain
mixed. Wheat production reports from many foreign
countries are optimistic, but there are scattered
reports of serious crop failure in parts of Asia and Central Africa. The Russian wheat crop may not match
last year's record level, but it will probably be adequate to cover domestic needs. Argentina and South
Africa appear to be pushing corn exports, a reflection
of the increased production levels of recently

r
Number 1274

harvested crops. U. S. soybeans are facing growing
competition from foreign producers, particularly
Brazil, and from Peruvian fish meal, once again
becoming available on world markets.
In the current marketing year, U. S. wheat exports
are likely to fall slightly below the U.S. Department of
Agriculture's 1.2 billion bushel estimate. Corn exports
may be slightly above the USDA projection of 1.2
billion bushels. Soybean exports will likely be very
near the present estimate of 585 million bushels.
Domestic demand for corn and soybean meal may
be affected by the current livestock situation. Declining livestock feeder margins, in some instances
amounting to rather substantial losses, have induced
many cattle and hog feeders either to hold activity at
present levels or cut back on the volume of animals being fed. Although hog inventory numbers are up
slightly, farrowings have fallen slightly below the
year-earlier pace. Placements of cattle on feed were
down 12 percent during the first quarter of 1974. In addition, about mid-February the ban on DES was lifted,
an action suggesting better feed utilization rates in the
future and slightly lower consumption rates of feed.
As a result, the increased disappearance rate of corn
during the first half of the corn marketing year may be
somewhat offset during the second half.
Corn and soybean prices will continue to be highly
sensitive to weather developments, both in the United
States and abroad. While the early planting of corn
generally favors high yields, cool temperatures and
wet conditions could reduce stands and increase the
chance of insect damage.
On balance, the current situation suggests further
downward pressures on corn prices depending largely
on how stands emerge. However, given the present
level of supplies, corn prices could make rather
volatile moves in either direction. For soybeans, the
larger carryover plus the prediction of only a slight
reduction from last year's record crop would not seem
conducive to a sustained upward trend in prices.
Wheat prices will probably be subject to additional
downward pressures throughout the harvest season
with brief upward swings coming on the strength of
foreign purchases.