 "That means prices should generally favor corn over soybeans for
the U.S. spring planting, and then soybean prices should be high
enough from about August forward to encourage more soybean acres
in South America," said Darrel Good. "The market appears to be
giving the correct signals for now but must avoid the mistake of
2006, when prices encouraged too large a shift from corn to
soybeans."Good's comments came as he reviewed acreage and
yield needs in 2008. On Feb. 22, members of the USDA's Wheat,
Feed Grains, Rice and Oilseeds Interagency Commodity Estimates
Committees released a grains and oilseeds outlook for 2008.
Among other things, the outlook contains forecasts for large
year-over-year increases in U.S. cropland acreage in 2008 and a
sizable year-over-year increase in the U.S. average corn yield.
"Even with the expectation of a large supply response in
2008, forecasts show prospects of declining U.S. corn
inventories and a continuation of very small U.S. soybean
inventories by the end of the 2008-09 marketing year," said
Good. "Domestic wheat inventories are expected to nearly double
from the end of the current marketing year --June 1, 2008 -- to
the end of the 2008-09 marketing year.
"The average price received by producers for each of these
crops in the 2008-09 marketing year is expected to be
significantly higher than the average projected for the current
year, but well below the price implied by current 2008-09
futures prices."
Combined planted acreage of corn, soybeans and wheat in 2008
is projected at 225 million acres, 7.4 million more than planted
in 2007. Acreage of the eight major crops -- including also
sorghum, oats, barley, rice and upland cotton -- is expected to
increase by 6.8 million acres.
"Increased acreage of corn, soybeans and wheat is expected to
come from a combination of reduced cotton acreage -- 1.1
million; increased double-cropping of soybeans -- perhaps 2
million acres by our calculations; and land not renewed for the
Conservation Reserve Program -- a maximum of 2.5 million," said
Good. "That total of 5.6 million acres still leaves 1.8 million
acres of the projected increase not accounted for. Perhaps that
increase will come from forage and grassland as cow numbers are
reduced and from other grains and oilseeds."
Good noted that the projections for the 2008-09 marketing
year supply-and-demand balance for corn are especially
interesting.
"Planted acreage is expected to decline by 3.6 million acres,
while acreage harvested for grain is expected to decline by 3.8
million," he said. "The U.S. average yield is projected at a
four-year high of 154.9 bushels, 3.8 bushels above the 2007
average.
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"On the consumption side, the USDA sees corn use for ethanol
production increasing by 900 million bushels -- 28 percent; feed use
declining by 550 million -- 9 percent; and exports declining by 300
million bushels -- 12 percent. Year-ending stocks are projected at a
meager 1.243 billion bushels, or 9.5 percent of projected use."
If the 2008 U.S. corn yield is closer to the long-term trend of
152.5 bushels, with all other forecasts unchanged, year-ending
stocks would decline to 1.045 billion bushels, or 8 percent of use.
If combined feed use and exports decline by less than 850 million
bushels, year-ending stocks would be even tighter.
"The conclusion is that planted acreage of corn in 2008 needs to
be larger than 90 million acres in order to reduce the risk of a
shortage in supply and much higher prices," said Good.
For soybeans, the USDA projects U.S. planted acreage at 71
million, 7.4 million more than planted in 2007. Harvested acreage,
at 70.1 million, would be 7.3 million more than harvested in 2007. A
U.S. average yield of 42.1 bushels and a crop of 2.95 billion
bushels are projected for 2008.
Domestic use of soybeans is expected to increase by 33 million
bushels, and exports are expected to decline by 95 million bushels,
leaving year-ending stocks of 169 million bushels, or 5.7 percent of
projected use. That compares to projections for the current year of
160 million and 5.3 percent, respectively.
"Is such a large increase in U.S. soybean acreage really needed
in 2008?" Good asked. "The alternative is for South America to
increase acreage more aggressively and to meet a larger percentage
of the export market demand for soybeans in 2008-09 and beyond. That
scenario would allow the U.S. to plant more corn than currently
forecast."
As of Feb. 22, the level of prices for the 2008 crops appears to
favor corn production over soybean production in the Midwest.
Good offered Illinois as an example.
"Using the long-term -- 1960 through 1970 -- trend corn and
soybean yields for the nine crop reporting districts to forecast
expected yield for 2008 along with current harvest bids for each
crop, the expected gross revenue for corn exceeds that of soybeans
from about $135 per acre in the west to $222 per acre in the
west-southwest," he said.
"Crop budgets suggest that expected yields and current prices
favor corn production over soybean production in most of the state."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences] |
