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Markets Ponder Supply, Shift Focus to Demand

posted on October 15, 2004


Historically, prices for both corn and soybeans hit their annual lows during the month of October. Over the past 18 years, corn has bottomed out at an average price of $2.17. The average annual low for soybeans is $5.65.

With all the talk in recent weeks focusing on record harvests, traders have been focused on potentially burdensome supplies. But another market mover emerged this week. It is called demand.

Markets Ponder Supply, Shift Focus to Demand As stunning as the USDA crop numbers were this week, the market always has an easier time digesting supply numbers than it does deciphering demand. And demand is where the trade will focus its attention over the next five months.

Here's a quick rundown of the supply/demand numbers released alongside the production report by USDA this week:

--Projected ending stocks for wheat were lowered nine million bushels to 569 million, thanks to expected increases in exports and feed use. World ending stocks also were lowered.

--Projected ending stocks for corn jumped 482 million bushels from last month, to nearly 1.7 billion bushels. In addition to the sharp increase in production, the carryout numbers swelled because of lower-than-expected exports. Global ending stocks also increased.

--Domestic soybean ending stocks are projected at 405 million bushels. That's more than double last month's estimate and the highest level in 18 years. The carryout for world oilseed stocks also jumped.

USDA saw reduced carryout and increased exports actually raising average price projections for wheat by a nickel to $3.30 a bushel. Average price projections for corn and beans, however, were reduced to $1.95 and $5.10 per bushel, respectively.


Tags: agriculture crops markets news USDA