"The question is whether trend yield will be sufficient," said
Darrel Good. "An estimate of actual planted acres will not be
available until June 30.
"In addition, even with timely planting, yields are still
mostly dependent on summer weather conditions."
Good's comments came as he reviewed corn production
prospects, which he termed "uncertain."
The USDA's Prospective Plantings report released on March 31
provided much of the fuel for the spring rally in corn prices.
Corn producers reported intentions to plant only 86.014 million
acres of corn, nearly 7.6 million fewer acres than planted in
2007. Intentions were well below expectations and well below the
magnitude of acreage needed to allow corn consumption to
continue at the current rate of 13.11 billion bushels per year.
"It may be that the size of the market for U.S. corn will not
grow during the 2008-09 marketing year even without further
price increases," said Good. "There is some evidence, for
example, that hog producers are reducing the size of the
breeding herd, pointing to a decline in the number of hogs to be
fed in 2009.
"Exports of U.S. corn may decline modestly from the record
level being experienced this year if world wheat production
rebounds and if the U.S. dollar strengthens. The size of the
Chinese corn crop and subsequent trade policies, however, will
also be important for U.S. corn export demand."
Good noted that ethanol demand for corn is also a little more
uncertain as policymakers debate proposals to reduce the level
of biofuels production mandates and the magnitude of the
blender's tax credit.
"Changing the level of mandates, however, would likely have
very little short-term impact on the demand for corn to produce
ethanol if the economics of production remains favorable," he
said. "The level of the tax credit has a more direct impact on
the returns to ethanol production. At current prices for corn
and ethanol, however, corn-based ethanol production would remain
profitable even with a modestly lower blender's tax credit."
The USDA's World Agricultural Outlook Board will release the
first supply, demand and price projections for the 2008-09 U.S.
corn marketing year on Friday. Those projections will likely
show a lower level of consumption in the year ahead than is
currently projected for the 2007-08 marketing year.
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"The smaller projection will be, in part, forced by a production
forecast constrained by intended plantings and trend yield," said
Good. "The potential size of the corn market at current price levels
is extremely important in evaluating the size of the 2008 U.S. corn
crop needed to avoid rationing of use by higher prices.
"If, for example, market size is seen as 13 billion
bushels, the 2008 crop needs to be at least 12.7 billion bushels to
maintain year-ending stocks at or above 1 billion bushels. If 86.014
million acres of corn are planted, harvested acreage for grain would
likely be near 79 million acres under average weather conditions."
Therefore, he added, a crop of 12.7 billion bushels
would require a national average corn yield of 160.8 bushels, nearly
10 bushels above the 2007 average.
"Even with a potential market for only 12.5 billion
bushels, the U.S. crop would need to be near 12.2 bushels, requiring
a national average yield of about 154.4 bushels per acre to maintain
year-ending stocks at 1 billion bushels," he said.
There is some possibility that planted acreage of
corn will exceed intentions reported in March. The market will
monitor the USDA's weekly report of planting progress to evaluate
both the likely magnitude of planted acreage and average yield
potential.
"Rapid planting would favor an increase in acreage
and at least a trend yield," he said. "Planting progress in April
was generally very slow, with only 10 percent of the crop planted as
of April 27, compared to 20 percent last year and the five-year
average of 35 percent.
"Rapid planting during the first two weeks of May
would still support expectations for more planted acreage and
expectations for at least a trend yield in 2008."
Even with a slower rate of planting than expected,
corn prices stabilized last week.
"There is a general perception that, given a window
of opportunity, producers can now plant the crop more rapidly than
in the past," said Good.
"While modern planting systems clearly allow
individual producers to plant more acres per day, there is no clear
evidence that in aggregate the corn crop actually gets planted more
rapidly in recent years than three or four decades ago."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences] |