 "If ethanol production proceeds as expected, an additional 1
billion bushels of corn may be required during the 2008-09
marketing year," said Darrel Good. "Much of that may be supplied
out of carryover stocks of the 2007 crop, limiting the need for
increased corn acreage in 2008."The magnitude of the needed
increase in corn acreage will have significant implications for
corn and soybean prices if U.S. winter wheat acreage is
increased and if South American producers make only a modest
increase in soybean acreage. More corn acres will likely be
needed in 2009."
Good's comments came as he reviewed the potential size of the
2007 U.S. corn crop, now forecast by the USDA at 13.308 billion
bushels, 254 million (1.9 percent) larger than the August
forecast and 2.773 billion (26.3 percent) larger than the 2006
crop.
"The larger crop forecast reflects the expectation of a U.S.
average yield of 155.8 bushels," he said. "That forecast is
three bushels above the August forecast and 6.7 bushels above
the 2006 average, but 4.6 bushels below the record yield of
2004."
While the U.S. average yield is not expected to be record
large, new records are expected in a number of states where the
growing season was generally favorable, including Iowa,
Louisiana, Nebraska and Texas.
"The Illinois average yield is expected to equal the 2004
record of 180 bushels," said Good.
Relatively low yields are expected in areas that experienced
poor growing conditions. These include the states of Delaware,
Maryland, Michigan, North Carolina, Tennessee and Virginia.
The large U.S. corn crop is expected to be met with generally
strong demand. Even with prices near historically high levels,
consumption during the current marketing year is expected to
reach 12.79 billion bushels, 1.42 billion above the record
consumption estimated for the year just ended.
"The increase is expected to be led by an increase in corn
used for ethanol production, although the USDA's forecast for
such use is 100 million bushels below the August forecast," said
Good. "At 3.3 billion bushels, use is expected to exceed that of
the 2006-07 marketing year by 1.175 billion bushels.
"Consumption will be influenced by the pace of completion of
new ethanol plants and the processing margins of ethanol
producers."
Exports of U.S. corn during the current marketing year are
now projected at 2.25 billion bushels, 130 million larger than
exports during the 2006-07 marketing year and the largest in 18
years. The expectation of large U.S. corn exports is driven by
prospects for tightening world grain supplies, robust world feed
grain consumption and less export competition from Brazil and
China.
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 "In addition, early sales of U.S. corn for export during the
current marketing year are very large," Good noted. "The USDA
reported that as of Sept. 6, sales of corn for delivery in the
2007-08 marketing year -- which included undelivered sales for the
year just ended -- at 656 million bushels. Total sales at the same
time last year were only 496 million bushels. The largest
year-over-year increase in sales is to Mexico."
Finally, the USDA forecasts a 100 million bushel (1.7 percent)
increase in feed use of corn during the 2007-08 marketing year,
reflecting an expected 2 percent increase in production of livestock
and livestock products.
"Still, the projection appears a little aggressive, given the
expectation of an increase of 90 million bushels in feed use of
other coarse grains and a 53 percent increase in production of
co-product feed from ethanol production," said Good. "Stocks at the
end of the 2007-08 marketing year are projected at 1.675 billion
bushels, 533 million bushels more than were thought to be in store
at the beginning of the year."
The USDA will release new production forecasts in October and
November and a final production estimate in January 2008. The
production forecasts are based partly on a survey of producers who
report actual and expected yields.
"The October forecast will capture a large sample of actual yield
results," said Good. "In addition, the October report will
incorporate 'administrative' information -- primarily from the Farm
Service Agency -- on actual planted acreage.
"Based on historical patterns of changes in the monthly
production forecasts, it would not be surprising if the October
and/or November corn production forecasts exceed the September
forecast, particularly if northern crops avoid significant freeze
damage."
For now, Good added, marketing and storage decisions of corn
producers will continue to be influenced by the price level and the
magnitude of the local basis. Basis remains generally weak in many
areas, with cash and futures prices failing to converge in the
delivery markets at the expiration of the September contract. The
weak basis generally favors storage of the crop.
"In addition, the large carry in the market makes forward pricing
a portion of the stored crop attractive as well," said Good. "At
Illinois locations where harvest is already active, for example,
bids for January 2008 delivery exceed spot cash bids by 25 cents to
35 cents per bushel.
"If the basis recovers to a more normal level in 2008, hedging
the stored crop could result in a large gross return on corn stored
to the spring 2008 -- 60 cents to 70 cents in central Illinois."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
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