December 12, 2001 | By: Laura Skillman
LOUISVILLE, KY

The price outlook for corn and soybeans will hinge on worldwide production, exports and U.S. livestock feed demand amid an economic slowdown.

American grain farmers have seen four years of record worldwide consumption of corn and three years for soybeans. The U.S. Department of Agriculture is predicting record consumption in the current marketing year as well.

"That's the hope, that this consumption is really there, then there's some room for just a little bit more optimism," said Steve Riggins, University of Kentucky grain-marketing specialist.

Corn consumption is measured by exports, livestock feed use, and food, seed and industrial uses. The food, seed and industrial component is primarily corn sweetener such as that used in soft drinks and ethanol. This component continues to grow and within the past five years has grown equal to export demand.

Livestock feed demand is the key component that drives grain prices, Riggins said. That demand is impacted by the demand for meat which is influenced by the number of people eating and their willingness and ability to pay, he said.

"That's why there's a little bit of concern on everyone's part about this weaker economy after the longest, most robust expansion in our history," he said.

Because of that uncertainty, the Jan. 11, 2002, release by the USDA of figures that can be used to determine the strength and pace of domestic consumption will be important.

"We have a pretty good handle now on export but no measure on corn on weekly feed demand," he said. "On soybeans, we have monthly crushing reports and those look good, so there is no need to panic. But we are a little concerned."

The picture for wheat is different. There has been a long term decline for exports. The weak export market is not a hopeful picture in the future, he said. The basic hope would be if there was some kind of significant cropping problem in one of the main wheat growing countries. Wheat is produced on every continent in the world.

In summary, record-level uses are projected for corn, meaning stocks will decline and in general that sets the stage for slightly higher prices. In soybeans, there was a record crop and record use. But the crop was so large, Riggins said, the stocks will build and Brazil and Argentina are having near-perfect planting conditions. Therefore, it does not bode well for a price rally for soybeans. For wheat, he said, the demand for U.S. wheat is so anemic it is not a very encouraging situation.

Contact: 

Steve Riggins, (859) 257-7256