The May supply and demand forecasts provided the first look at the 2005-06 crop year. The data were mixed with the corn forecast considered bearish with a further increase in carryover stocks above the high 2004-05 levels. USDA put the 2005 corn yield at 148 bushels per acre, resulting in a 11.0 billion bushel crop. Even with a 110 million bushel increase in expected total use, stocks would rise to 2.54 billion bushels next season. The mid-point of the 2005-06 price forecast is $1.75. A lot can still happen to change the outlook, but the first USDA forecast provides a fairly bleak outlook for corn prices next season.

Current year soybean exports continue to boost the forecast. USDA put 2004-05 soybean exports at 1.1 billion bushels, up from 1.08 billion last month and 1.0 billion when the season started. Ending stocks are put at 355 million bushels, still up sharply from 112 million at the end of 2003-04, but well below the 460 million predicted in November. The 2005 crop is put at 2.9 billion bushels, using a national average yield of 39.9 bushels per acre. Demand is expected to exceed production with exports rising to 1.125 billion bushels. Soybean stocks would fall to 290 million bushels by the end of the 2005-06 season, according to the initial USDA forecast.

Cotton production for 2004 was revised up in the May World Agricultural Supply and Demand Estimates (WASDE). Production is now put at 23.25 million bales, up from 23.08 million in April and the pre-season 17.6 million bales reported last May. The yield is now put at an amazing 855 pounds per acre, 17% above the previous record high set in 2003. USDA raised the current season export forecast from 13.2 million bales to 13.4 million. This essentially offset the rise in production and ending stocks for 2004-05 remain at 7.1 million bales. Exports are projected to increase by more than 1 million bales to 14.5 million, and total cotton use is up to 20.3 million bales next year. This results in a decline in carryover stocks in the 2005-06 season to 6.3 million bales. Production for China for 2005-06 is projected at 25.5 million bales, while use is put at 41 million bales. Imports by China may rise to 15 million bales, compared with 8 million in the current season.