U.S. grain is piling up unsold, customers are scarce, and, barring a war, prices won`t rally soon. That is the gloomy picture that emerged for Midwest farmers in a series of government reports Friday.
Ample world supplies and lagging export and domestic sales mean 50 million more bushels of wheat and 35 million more bushels of soybeans than estimated won`t be used from last year`s crop, the Agriculture Department reported Friday.
Corn is an exception. Corn prices, despite lagging exports, may rise because the department reported that U.S. poultry and cattle raisers fed surprisingly more of the grain last fall than estimated by private analysts.
So, the department lowered by 51 million bushels, to 1.185 billion bushels, the amount of corn expected to remain in storage when the crop year ends Sept. 1. That`s the smallest reserve in about 15 years.
While corn futures prices will be held back by expected wheat and soybean declines, by late spring the price could advance close to $2.75 a bushel, said Martyn Foreman, analyst with Agrivisor, a market advisory service affiliated with the Illinois Farm Bureau.
A Persian Gulf war initially would send grain prices higher, analysts said, temporarily offsetting the bearish influence of growing U.S. stockpiles .
”Oil prices will jump if there is a war and that will spill over into other commodities,” said Jay Meehan, vice president of Rodman & Renshaw Inc. ”Higher oil prices would deepen a recession, and ultimately grain markets could hit new lows.”
The sharp increase in soybean carryover stocks ”will be bear fodder for traders Monday morning,” said Dave Armstrong, another Agrivisor analyst.
At the opening on the Chicago Board of Trade Monday, soybean futures prices should be down 2 to 4 cents a bushel, wheat off 1 cent and corn up 1 to 2 cents, said Victor Lespinasse, vice president with Dean Witter Reynolds Inc. ”However,” he said, ”this report will have a short shelf life. The situation in the gulf will outweigh everything else.”
Potential foreign customers need money to pay for U.S. grain, said James Johnson, a wheat broker with Geldermann Inc. ”Many of them aren`t in a position to pay for grain, and Congress is resisting extending any further credit. So, whether it is peace or war, it will be difficult for grain markets to rally.”
The Soviet Union, a cash-strapped customer, is expected to buy 2 million fewer metric tons of grain than forecast, the Agriculture Department said.
In another report, the department estimated that farmers planted 51 million acres of winter wheat last fall, a decline of 10 percent from a year earlier.
Planted acreage in the soft red winter wheat belt, which includes Illinois, dropped 21 percent, and planting was down 6 percent in the hard red winter areas of the Great Plains.
The reduction was expected because wheat prices have dropped by about 40 percent since spring; further, the new farm bill requires farmers to idle 15 percent of their acreage to qualify for subsidies.
Reflecting damage from freezing temperatures late last month in California, the department lowered its citrus production forecast by 14 percent, to 11.6 million tons.
