 "This is particularly true for corn," said Darrel Good. "The
majority of biofuels production continues to be corn-based
ethanol production. That will continue to be the case for the
next few years."However, the USDA acknowledged in the Feb. 10
report of domestic supply and consumption prospects that sorghum
is increasing in use as a feedstock in some ethanol plants in
the southern and central Plains."
Good's comments came as he reviewed the factors that will
influence corn and soybean prices over the next several months.
Important among those factors will be the 2009 acreage decisions
of U.S. producers and the strength of the biofuels markets.
Expectations about planted acreage of corn and soybeans in
the United States are in a wide range, and actual planting
decisions may remain uncertain for some time, he noted.
"Uncertainty centers on at least three factors," he said.
"First, the prices of 2009 crop corn and soybeans continue to
fluctuate, giving mixed signals to producers about the likely
relative profitability of corn and soybeans in the 2009-10
marketing year.
"Second, there is considerable uncertainty about the relative
cost of producing corn and soybeans in 2009. Fertilizer prices
were very high in the fall of the year but have recently
declined, at least for some ingredients in some markets. The
cost of producing corn in 2009 could vary substantially among
producers."
The distribution of producers who have paid high input prices
and those who may pay lower prices could influence planted
acreage, but that distribution is not known, he added.
"Third, the sharp decline in winter wheat seedings and
expected decline in cotton acreage in 2009 will result in
additional acreage for other spring-planted crops," he said.
"The magnitude of that acreage is not known with certainty
because some acreage could return to non-row crop production or
be idled due to expectations of tighter margins for row crop
production.
"In addition, the large decline in seedings of soft red
winter wheat may result in fewer acres doubled-cropped to
soybeans."
Under current conditions of relatively low energy prices and
tight margins for ethanol producers, it is believed that the
Renewable Fuels Standards will determine the level of biofuels
production and, therefore, the demand for corn for ethanol.
"Those standards call for 10.5 billion gallons of renewable
biofuels use in 2009 and 12 billion gallons in 2010," said Good.
"The standards increase to 15 billion gallons by 2015.
"Assuming those standards remain in place, how much corn will
be used for ethanol production in the 2008-09 and 2009-10
marketing years? The answer is not straightforward."
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First, Good explained, mandated use is for calendar years, which do
not match corn marketing years. Second, there is some uncertainty
about the mix of feedstocks that will be used to meet the mandated
level of use.
"Third, within certain rules, blenders can use surplus biofuels
-- in excess of the RFS -- in 2008 to meet the 2009 requirements and
can borrow some of next year's requirements to meet this year's
standards," he said.
Despite the uncertainty surrounding biofuels production, it is
clear that if the RFS figures are maintained, there will be large
increases in the use of corn for ethanol production over the next
two years and beyond. The USDA projects use during the current
marketing year at 3.6 billion bushels.
"We would expect use to exceed 4 billion bushels in 2009-10 and
to exceed 5 billion bushels by 2015-16," said Good.
To Good, the likely increase in corn use for ethanol, along with
a rebound in U.S. corn exports during the 2009-10 marketing year,
suggests that planted acreage of corn in the United States in 2009
needs to be maintained at least at the level of 2008.
For soybeans, an increase in planted acreage is not needed in
2009 if the U.S. average yield is near trend value of 42.5 bushels
and use during the 2009-10 marketing year increases by less than 250
million bushels, or 8.4 percent.
"The USDA will release the results of the Prospective Plantings
survey on March 31," said Good. "With the large decline in winter
wheat seedings, it is possible that this report will reveal
intentions to plant too much of one or more crops in 2009.
"Based on anecdotal evidence, intentions for a surplus of soybean
acreage may be revealed in that report."
[Text from file received from
University of
Illinois Extension]
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