 "More acreage of all three crops may be needed in the United
States in 2008, and the prices of other crops are moving higher
as well," said Darrel Good. "In addition to more acreage, a
favorable growing season is needed in 2008 to prevent another
round of sharply higher prices."The persistence of high grain
and oilseed prices will continue to put some upward pressure on
retail food prices and intensify the debate about aggressive
biofuel mandates."
Good's comments came as he reviewed corn, soybean and wheat
prices, which continue to climb as market fundamentals remain
generally constructive.
"Typically, there are both bullish and bearish market
fundamental factors and the market must judge the net effect of
those factors," said Good. "Currently, there are few bearish
factors to weigh against the combination of strong demand and
supply concerns.
"Futures prices for the 2008 crops of corn, soybeans and
wheat all reached new highs in recent trading sessions."
Good noted that he had outlined some of the supporting
factors for corn prices in last week's report. The case for
strong domestic and export demand continues. Congress is
considering energy legislation that would significantly increase
biofuel mandates.
"While a cap on corn-based ethanol production may be included
in that legislation, the cap would be well above current levels
of production," he noted. "A cap of 15 billion gallons, for
example, would eventually require about 5.5 billion bushels of
corn, compared to projected use for the current year of 3.2
billion bushels.
"Legislation being considered presumes heavily on the
development of cellulosic ethanol technology that is
economically competitive with corn-based ethanol. If that
technology is slow in developing, corn-based ethanol demand will
remain very strong as long as crude oil prices are high."
For soybeans, export demand remains robust as well. Through
Dec. 6, cumulative soybean export inspections totaled 345
million bushels, 35.3 percent of the total expected to be
exported for the year. A year ago, 37 percent of the marketing
year total had been shipped by the same time of the year.
"However, unshipped sales as of Nov. 29 this year totaled 360
million bushels, 100 million larger than unshipped sales of a
year ago," said Good. "Outstanding export sales to China stood
at 207 million bushels, compared to 100 million bushels on the
same date last year.
[to top of second column]
 |
"Some early season dryness in parts of Argentina and Brazil and the
development of a strong La Nina weather pattern increase the
concerns about the size of the 2008 South American soybean crop,
particularly since the combined acreage in Brazil and Argentina is
estimated to be only 6 percent larger than acreage harvested last
year."
There is some evidence, Good added, of a slowdown in the use of
soybean oil for the production of biodiesel. Use reached a high of
312 million pounds in August, declined to 210 million pounds in
September and to 167 million pounds in October 2007.
Consumption data from 2006 suggests that a seasonal decline in
use during September, October and November might be expected.
"However, the 47 percent decline in use from August to October
this year compared to a 23 percent decline in 2006," said Good.
"High soybean oil prices make biodiesel production less profitable,
even as diesel fuel prices remain high. As soybean oil prices have
stagnated over the last month, however, soybean meal prices have
moved higher, primarily in conjunction with higher corn prices."
In mid-November, it appeared that the rally in wheat prices was
over. It appeared that wheat acreage was on the rise worldwide, and
the pace of U.S. wheat export sales slowed. Seemingly, high prices
had accomplished the task of slowing the rate of consumption and
motivating an increase in production.
"Dryness in the hard red winter wheat areas of the United States,
dry conditions in India and Pakistan, and a late-season frost in
parts of Argentina rekindled those supply concerns," said Good. "A
smaller crop estimate for Canada was also released last week.
"In turn, those supply concerns resulted in a new round of export
sales of U.S. wheat. Buying by India was especially noteworthy."
As of Dec. 6, the USDA reported export inspections for the year
of 730 million bushels, 66 percent more than had been shipped last
year. In addition, unshipped sales as of Nov. 29 totaled 396 million
bushels, 114 percent larger than unshipped sales of a year ago.
"With the 2007-08 marketing year just half completed, U.S. wheat
export commitments have reached 90 percent of the USDA's projection
of exports for the year," he said. "A year ago, commitments at this
time of year accounted for 62 percent of marketing year exports."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
 |
