 "Beyond acreage, growing-season weather in the Northern
Hemisphere will be very important in determining crop size,"
said Darrel Good. "U.S. production has benefited from unusually
favorable growing conditions since 1996. While regional weather
problems have been experienced, the widespread weather stress
experienced in years like 1980, 1983, 1988, 1991 and 1995 have
been avoided."Under current conditions of low stocks and
strong demand, low yields in 2008 could create the need to
reduce consumption beyond what is already occurring in the U.S.
livestock industry."
Good's comments came as he reviewed recent actions in the
corn, soybean and wheat markets, where a steep rally that began
last fall faltered over the past week. After moving to a high of
$5.85, December 2008 corn futures dropped about 45 cents. The
decline in wheat and soybean futures prices was even more
dramatic. After topping at $12.65, July 2008 wheat futures at
Chicago lost $2.10. The November 2008 soybean contract reached a
high of $14.73 before dropping about $2.05 by early in the
session Monday.
"In general, prices of these commodities, particularly corn
and soybeans, have been very volatile since mid-January as the
market reacts to new information in these markets, as well as
the energy, currency and financial markets," said Good. "Prices
are being influenced by a wide array of complex factors."
However, he repeated, Northern Hemisphere production
prospects in 2008 are emerging as the key.
World wheat production reached a record 628.6 million tons in
2004-05 and remained large at 621.5 million tons in 2005-06.
Production dropped to 593.2 million tons in 2006-07 and reached
only 603.6 million tons in 2007-08.
"For the year ahead, there is a general expectation that
production will rebound due to increased seeded area,
particularly in the European Union," he said. "For the United
States, winter wheat producers have reported an increase in
seedings of only about 1.6 million acres, mostly soft red winter
wheat. Spring wheat producers are expected to increase acreage
following the 1.3 million cut last year.
"In addition to increases in the Northern Hemisphere,
production in Australia is likely to rebound from the extremely
low levels of the past two years. Early projections by the USDA
show prospects for world production to rebound to 645 to 655
million tons in 2008-09. Production at that level would allow
some significant rebuilding of world wheat stocks and would
result in a further decline in wheat prices."
For corn and soybeans, the immediate focus will be on
production prospects in the United States. The USDA will release
its annual Prospective Plantings report on March 31.
[to top of second column] |
"Expectations for corn and soybean planting intentions are in an
extremely large range as analysts try to anticipate how producers
will respond to the combination of high commodity prices and
escalating input costs," said Good.
"A decline in corn acreage and an increase in soybean acreage are
expected, but the market will have an opportunity to influence final
planting decisions. Last year, for example, area planted to corn
exceeded March intentions by 3.15 million acres, and area planted to
soybeans was 3.51 million bushels less than indicated in March."
A shortfall in corn production might be more problematic than a
shortfall in soybean production, he added.
"A small U.S. soybean crop and resulting high prices would likely
result in a significant response in South America," he said. "While
the same could occur for corn, it is generally believed that
Argentina, and particularly Brazil, have the capacity for a larger
response in soybean production than in corn production.
"In 2007, for example, corn acreage was unchanged in Brazil and
up 740,000 acres in Argentina. Soybean acreage increased by 2
million acres in Brazil and 2.2 million acres in Argentina."
While most of the focus on March 31 will be on the USDA's
Prospective Plantings report, the Grain Stocks report might also
hold some important information, particularly for corn. The Dec. 1
Grain Stocks report showed a surprisingly small inventory of corn,
implying a very large level of feed and residual use of corn during
the first quarter of the 2007-08 marketing year.
"As a result, the USDA increased the forecast of feed and
residual use of corn for the entire marketing year by 300 million
bushels," said Good. "The March stocks estimate will reveal if that
forecast is still valid, or whether the 2007 crop might have been
slightly overestimated."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
 |
