ISU Extension News

Extension Communications
3614 Administrative Services Building
Ames, Iowa 50011-3614
(515) 294-9915

6/16/03

FOR IMMEDIATE RELEASE

Contacts:
Robert Wisner, Ag Economics, (515) 294-6310, rwwisner@iastate.edu
Jean McGuire, Continuing Education and Communication Services, (515) 294-7033, jmcguire@iastate.edu

China and Ukraine May Affect Summer Crop Markets

Ames, Iowa -- Wheat production in the Ukraine is projected to be down 65 percent from last year, along with a modest decline in Chinese corn production, according to Robert Wisner, economist, Iowa State University (ISU) Extension. He says the expected smaller crops in both countries are weather-related. He added that crops in these two countries are major competitors with U.S. grain, and weather during their growing seasons may be a key influence on summer and fall corn prices. Ukraine's major crops are wheat and barley and it has been an aggressive exporter of feed wheat in the last two years.

Wisner noted that USDA field office reports from the Ukraine indicate winterkill on wheat may be the worst in 97 years. "The remaining unknowns are how much failed wheat has been replanted to spring grains and what yields are likely from spring-planted crops. Last year, parts of former Soviet republics also suffered serious crop problems, but replanting of failed areas to spring crops and favorable summer weather gave the region an excellent grain harvest." The economist said the winterkill problem was most severe in the Ukraine, but Russia and Kazakhstan also had considerable damage. They too are large grain exporters.

The USDA tentatively projects China's corn production to decline three percent from last year because of dry weather in its corn and soybean belt. China has been the world's second or third largest corn exporter (excluding France, which exports its corn within the European Union) much of the last decade. It also has become the largest export market for U.S. soybeans and experienced below normal rainfall in April and May.

The economist said crop-growing conditions in these two countries will be especially significant to the grain markets because of historically low world grain reserve supplies. Crop problems in these two countries are expected to be offset somewhat by a significant increased in production in Canada and Australia. Both of these countries suffered extreme drought last year.

USDA domestic crop supply and demand projections released on June 11, 2003 indicated that even with crop problems in China and the Ukraine, normal U.S. corn yields would likely bring modestly increased U.S. corn carryover stocks by August 31, 2004. The larger stocks are projected to cause a decline of 20 cents per bushel from this year in the 2003-04 marketing year average price of corn.

In contrast to a slight tightening of world wheat and feed grain stocks in the year ahead, Wisner noted that world soybean stocks appear adequate this summer and are likely to increase in 2003-04, if U.S. soybean yields are near normal. On June 11, the USDA raised its estimated 2003 Brazilian soybean production again. The latest estimate is 20 percent above last year's record crop, along with a 17 percent increase in Argentina. Both countries are expected to expand plantings again this fall. However, very low U.S. soybean stocks will make old-crop soybean prices quite sensitive to summer weather. With a normal 2003 U.S. soybean yield, USDA projects the U.S. average soybean price for 2003-04 to decline by 55 cents per bushel from the current year.

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ml: isufarm


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