WHAT SIZE CROPS ARE THE CORN AND SOYBEAN MARKETS TRADING?
December 2004 corn futures traded to a contract low of $2.25 on July 30, $1.165 below the contract high reached on April 8, 2004. November 2004 soybean futures traded to $5.68, $2.34 below the contract high reached on March 25, 2004. The favorable development of the 2004 U.S. crops is one of the factors contributing to the sharp decline in prices. In trying to judge future price direction, it is important to determine what size U.S. crops are reflected by current prices. There is no direct way to answer that question, but some perspective can be provided by analyzing the level of 2004-05 marketing year ending stocks implied by the current price level. First, current futures prices need to be translated into an average marketing year farm price for the 2004-05 marketing year. We do that by adjusting futures prices by the three-year average basis in each month from September 2004 through August 2005. This adjustment produces an average monthly cash price for the marketing year, which we
