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Z31,

DC BRANCH

Federal Reserve Dank of Chicago - -

•

September 22, 1972

CORN AND SOYBEAN crop prospects improved during
the past month according to the U.S. Department of Agriculture. Based on September 1 conditions, the 1972 corn crop is
expected to exceed 5.1 billion bushels—up 3.6 percent from
the August estimate but still 7.5 percent below the record
1971 level. Estimated soybean production is at a record 1.3
billion bushels, more than 1 percent above last month's estimate and 10 percent over last year's actual production.
The changes in the latest projections reflect adjusted
yield estimate's rather than revised acreage estimates. Estimated corn yields are now pegged at a record 89.7 bushels,
nearly three bushels above the 1971 crop but in line with the
1953-69 trend in corn yields. Soybeans are expected to yield a
record 28.1 bushels per acre on average—up one-half bushel
from last year.
Corn supplies for the 1972-73 marketing year starting
October 1 will be plentiful despite the lower production. Indeed, carryover—currently estimated at 1.15 billion bushels,
compared to less than 0.7 billion bushels last year—plus anticipated production portends total supplies of nearly 6.3 billion
bushels. This level, if it materializes, would represent a 3 percent gain over the bumper supplies available in this marketing
year, and would be substantially in excess of utilization.

ra_
ett r
Number 1188
will cause corn to replace wheat for feeding purposes) should
raise domestic utilization, but the gains likely will be small.
Corn exports, _which are estimated to haye risen_ by
nearly one-half during the current marketing year, should provide the largest relative gains in corn utilization during. the
1972-73 marketing year. The recent trade agreement with the
U.S.S.R. is expected to boost corn exports to that country
above the level of this year.(During the first ten months of the
current marketing year, some 80 million bushels of U.S. corn
were shipped to the U.S.S.R.) Moreover, the $390 million in
"special purchases" of agricultural, forestry, and fishery products by Japan, confirmed in the recent U.S.-Japan trade talks,
could also involve larger corn exports. These potential gains
could be partially offset, however, if the European grain crop
is larger than normal. Grain production prospects in Europe
currently appear favorable.

Large Carryover Boosts Corn Supplies
Soybean supplies for the 1972-73 marketing year—which
started September 1—will remain comparatively tight despite
the large projected increase in production. Since the 1969-70
marketing year, total utilization of soybeans has exceeded production. Consequently, carryover stocks have fallen from over
300 million bushels at the end of the 1968-69 marketing year,
to the estimated 60 million bushels on hand on August 31 of
this year. The lower carryover will partially offset the expected increase in the 1972 crop and hold total supplies at
around 1.35 billion bushels—about 6 percent greater than a
year ago, but below the total supplies available in the 1970-71
marketing year.

Billion bushels
7
6

Total supply
carryover
production

1111111101111•1111.

total use
exports

5

3

A continued strong demand for soybeans and products
will likely absorb most of the larger supplies. Although interrupted during the 1971-72 marketing year by short supplies
and high prices, both domestic utilization and exports of soybeans and products have been rising steadily for the past several years. These trends should continue in the current year.

1
0
1966 1967
1968 1969
1970
Year beginning October 1

1971

1972*

*Preliminary.

Utilization of corn rose sharply during the current marketing year in response to low prices. Further increases in
utilization during the 1972-73 marketing year, however, will
be limited because of the expected higher-than-year-earlier
prices. The higher-than-year-ago hog numbers expected by
early 1973, and the higher domestic prices of wheat (which

Despite larger supplies, distant futures contracts point to
above year-ago prices for both corn and soybeans—particularly
at harvesttime. December corn futures, for example, are currently trading at around $1.40 per bushel, equivalent to a farm
price of $1.20 to $1.25 per bushel depending on location. Last
December, farm prices for corn averaged $1.08 per bushel.
Similarly, November soybean contracts are trading at $3.37
per bushel. This compares to the $2.84 price received by
farmers in November of 1971.
Gary L. Benjamin
Agricultural Economist