USDA's 11 December World Agricultural Supply and Demand Estimates (WASDE) indicated that slower corn demand would result in increasing corn carryover, said Melvin Brees, Food and Agricultural Policy Research Institute (FAPRI), University of Missouri. Corn price expectations were reduced and 2008-09 prices are now expected to range from $3.65 to $4.35, said Brees. U.S. soybean ending stocks expectations are unchanged. Forecast 2008-09 soybean prices were lowered 85 cents and are now expected to range from $8.25 to $9.75.

Ethanol plants financial problems are expected to reduce the previously forecast amount of corn used for ethanol production, according to Brees. Although an increase over 2007-08, the current estimate of 2008-09 corn production used for ethanol of 3.700 billion bushels is down 300 million bushels from the November estimate at 4.00 billion bushels. The lower ethanol production expectation results in fewer distillers grains and contributed to an upward adjustment of 50 million bushels for corn feed use. Disappointing corn export progress has led to a reduction in export projections from 1.900 billion bushels to 1.800 billion bushels. No changes were made to production estimates, which will be updated in the USDA’s January 12, 2009 reports. The net result of the use adjustments was 2008-09 corn ending stocks projected at 1.474 billion bushels. This is up from the November estimate of 1.124 billion bushels and above pre-report trade estimates. World corn ending stocks estimates jumped from last month’s 110.12 mmt to 123.83 mmt as a result of slower use and production increases in China, Europe, Canada and Ukraine. Minor adjustments to soybean use left expected 2008-09 soybean ending stocks unchanged at 205 million bushels. This was within the range of pre-report trade expectations, but above the average estimate of 200 million bushels. A 30 million bushels cut in domestic soybean crush was offset by 30 million bushels increase in export expectations. Forecast 2008-09 soybean prices were lowered 85 cents and are now expected to range from $8.25 to $9.75.

Increased wheat imports of 10 million bushels and reduced food use of 10 million bushels results in increased 2008-09 wheat ending stocks from 603 million bushels (November estimate) to 623 million bushels. Low ocean freights are leading some eastern livestock producers to import wheat for feed use. World wheat supply and use adjustments resulted in an increase in expected world carryover from 145.25 mmt to 147.35 mmt. The USDA forecasted 2008-09 wheat prices were reduced 15 cents and are expected to range from $6.40 to $7.00.

Interestingly, although corn export expectations were reduced, this week’s export sales report (also released today) showed weekly corn export sales well above expectations, Brees said. Soybean sales were also above expectations. This resulted in uncertainty about market action following the report. Although the estimates were considered negative for corn, in early trading corn futures prices were trading higher. Soybean prices were showing double-digit gains in early trading. Although it appears to be positive price reaction following negative news, remember that the grain markets continue to depend on the general economy and other factors such as the value of the dollar and energy prices. Higher oil prices and a lower dollar were influencing the early futures trading. After the holidays, market participants will look to the January quarterly stocks, crop production and winter seeding reports for new fundamental information.