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"The USDA will survey farmers in March and release a Prospective
Plantings report on March 30. A large increase in corn acreage
is anticipated due to high prices and a favorable price ratio
relative to soybeans," said Darrel Good. "Much of that
increase is expected to come from soybeans, but reduction in
acreage of other crops is also anticipated. Downside risk in
corn and soybean prices appears limited until more is known
about the 2007 crop."
However, in the meantime, corn prices remain well-supported
in the face of the strong likelihood of expanded biofuels
mandates and the need for a large increase in U.S. corn acreage
in 2007, he noted.
"Soybean prices are receiving some support from the high rate
of consumption and the expectation of reduced U.S. acreage in
2007," he said.
Good said the president's call for the production of 35
billion gallons of alternative liquid fuels production by 2017
is likely to be actively pursued by Congress, ensuring strong
demand for corn-based ethanol production.
"Current mandates call for 7.5 billion gallons of renewable
fuels production by 2012," he said. "The Renewable Fuels
Association update of Jan. 25 indicated that 111 ethanol plants
are currently in operation, with capacity to produce 5.44
billion gallons. RFA also reported that capacity is being
expanded at seven of those facilities, and another 78 facilities
are under construction, representing additional capacity of 6.22
billion gallons.
"Total capacity of nearly 11.7 billion gallons suggests that
about 4.25 billion bushels of corn could be used for ethanol
production as early as the 2008-09 marketing year. That is
double the USDA's projection of use for the current marketing
year."
Also remaining brisk is the pace of both U.S. corn exports
and export sales. The USDA reports that 856 million bushels of
U.S. corn were exported during the first 20 weeks of the 2006-07
marketing year, 17 percent more than during the first 20 weeks
of the 2005-06 marketing year.
Unshipped sales as of Jan. 18 were reported at 480 million
bushels, compared to outstanding sales of 292 million bushels a
year earlier. For the year, USDA expects exports to be only 103
million bushels more than last year.
"There may be some additional slowing of domestic feed use of
corn as a result of higher prices," Good noted. "USDA estimates
indicate that feed and residual use of corn during the first
quarter of the 2006-07 marketing year was 3 percent less than
the record level of use in the previous year.
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"The latest weekly USDA reports show some slowdown in the number of
broiler eggs set (3 percent) and broiler chick replacements (1
percent). The January Cattle on Feed report showed placements into
feedlots during December 2006 were 9 percent less than in December
2005."The pace of soybean consumption is well
above that of last year. The Census Bureau estimates that the
domestic crush of soybeans from September through December 2006
totaled 615.4 million bushels, which was 24.7 million bushels, or
4.2 percent, larger than the crush in the same four months last
year. The year-over-year increase in December was 5.3 percent.
"Consumption of soybean meal, domestic and export, during the
first quarter of the 2006-07 marketing year was estimated at 11.05
million tons, 4.1 percent more than consumed a year earlier," he
said. "The pace exceeds the USDA's 3.3 percent projected increase
for the entire year.
"Soybean consumption in the first quarter of the year totaled
5.273 billion pounds, 10.4 percent more than consumed last year. For
the year, the USDA projects a 7.5 percent increase. Even with some
slowdown in livestock production, the soybean crush for the entire
year may exceed the current USDA projection of 1.78 billion
bushels."
Exports of U.S. soybeans during the first 20 weeks of the 2006-07
marketing year were estimated at 564 million bushels, 21 percent
more than exported in the first 20 weeks of the 2005-06 marketing
year. As of Jan. 18, the USDA estimated that 262 million bushels of
soybeans had been sold for export but not yet shipped. Unshipped
sales a year earlier totaled only 166 million bushels.
"Shipments plus outstanding sales of 826 million bushels are
nearly 30 percent larger than the total of a year ago," said Good.
"The USDA currently projects an 18 percent increase for the year.
"Exports during the last half of the marketing year will also be
influenced by the size of the South American harvest. The USDA
currently projects that crop at 3.89 billion bushels, 140 million
bushels larger than the record harvest of 2006. The largest
year-over-year increase is expected in Argentina. Weather and crop
conditions remain generally favorable in Brazil and Argentina."
(Text copied from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences)
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