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For the 2007 corn crop, the USDA projected the U.S. average
yield potential at 150.3 bushels, based on "an econometric model
fit over 1996-2006, using a trend variable, July rainfall and
temperature, and planting progress as of mid-May," Good noted.
"The methodology differs from that of last year that based the
yield calculation on a 'linear trend fit over 1960-2005 (1988
omitted), adjusted for 2006 planting progress.' The projection
this year is about two bushels less than expected by the market,
but is about 1.5 bushels above a projection based on the simple
linear trend from 1960 through 2006."
Good believes it is likely that the trend yield for 2007 is
overstated using the USDA methodology based on a relative short
history.
"Growing conditions have been unusually good, on average, for
the past 11 years, so that a trend calculation for 2007 based on
a longer history is probably more accurate," he explained.
"Regardless of the trend calculation, however, July and August
weather will dominate yield prospects for 2007."
Based on March planting intentions, a forecast of acreage
harvested for grain, and the trend yield calculation, the 2007
crop is projected at 12.46 billion bushels, 1.93 billion larger
than the 2006 crop. That is about 170 million bushels above
Good's forecast of most likely production.
On the consumption side, the projection of exports during the
current marketing year was reduced by 50 million bushels, while
the forecast of processing use of corn was reduced by 10 million
bushels. As a result, the projection of year-ending stocks was
increased by 60 million bushels, to a total of 937 million.
For the 2007-08 marketing year, the USDA projects a decline
of 150 million bushels (2.6 percent) in feed and residual use of
corn, a decline of 225 million bushels (10.2 percent) in
exports, and an increase of 1.265 billion bushels (35.9 percent)
in processing use of corn.
"Most of the increase in processing use is from a
1.25-billion-bushels (58.1 percent) increase in the projection
of corn used for ethanol production," said Good. "Consumption of
corn for all purposes during the year ahead is projected at
12.465 billion bushels, 890 million (7.7 percent) more than
expected to be used this year.
"Year-ending stocks are projected at 947 million bushels, or
7.6 percent of expected consumption."
For the 2007 soybean crop, the USDA projected the U.S.
average yield potential at 41.5 bushels "based on 1989-2006
regional trend analysis." Last year, the regional trend analysis
was for the period 1978-2005.
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 Based on March planting intentions, the five-year average
planted-to-harvested acreage ratios by state, and the trend yield
calculation, the 2007 crop is projected at 2.745 billion bushels,
443 million smaller than the record large 2006 crop.
Exports during the year ahead are forecast at 1.08 billion, the
same as expected for the current year. The domestic crush is
forecast at 1.79 billion bushels, 20 million more than the forecast
for the current year, which was increased by 5 million bushels in
the May report.
"A modest (1.8 percent) increase in domestic meal consumption and
a large (5.6 percent) increase in domestic soybean oil consumption
are expected," said Good. "Meal and oil exports during the year
ahead are expected to be near the level of this year's exports.
Year-ending stocks of soybeans for the 2007-08 marketing year are
projected at 320 million bushels, 290 million less than the
projection for the current year."
The USDA's first forecast of the size of the 2007 U.S. winter
wheat crop came in at 1.616 billion bushels, 317.5 million larger
than the 2006 crop. The hard red winter wheat crop is forecast at
1.028 billion bushels, 346 million larger than the 2006 harvest,
while soft red winter wheat production is forecast at 347 million
bushels, 43.5 million smaller than the 2006 harvest.
"An official forecast of the size of the spring wheat crops was
not made, but the USDA's World Agricultural Outlook Board calculated
production potential at 558 million bushels, compared to 514 million
bushels in 2006," said Good. "Production of all classes of wheat is
projected at 2.174 billion bushels, 362 million larger than the 2006
harvest."
The forecast of marketing year wheat exports was increased by 10
million bushels for the current year, to a total of 910 million.
Exports are projected at 975 million bushels for the 2007-08
marketing year. In addition, feed and residual use of wheat is
projected to increase from 170 million bushels this year to 230
million in the upcoming year (starting June 1), due to high corn
prices.
Even with a large increase in production, stocks of U.S. wheat at
the end of the 2007-08 marketing year are expected to remain
relatively small, at 469 million bushels, only 57 million larger
than stocks at the end of the current year.
"The USDA forecasts the 2007-08 marketing year average farm
prices in a range of $4.35 to $4.95 for wheat, $3.10 to $370 for
corn and $6.50 to $7.50 for soybeans," said Good. "At the close of
trade on May 11, futures markets reflected average farm prices for
the upcoming year at or above the high end of these ranges.
"Futures reflected 2007-08 average farm prices near $3.75 for
corn and $7.90 for soybeans."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
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