"If current USDA projections are
correct, the 2004-05 U.S. soybean marketing year will end with
stocks of 460 million bushels," said Darrel Good. "That is at least
260 million more than generally considered adequate. Allowing for an
increase in use to 2.9 billion bushels in the 2005-06 marketing
year, the 2005 U.S. crop could be as small as 2.65 billion bushels
without creating a shortage."
With a U.S. average yield of 40 bushels, a crop of 2.65 billion
bushels could be generated with harvested acreage of 66.25 million
-- 7.74 million fewer than harvested in 2004, Good added.
"Without some reduction in U.S.
production or a substantial increase in use, soybeans could remain
in surplus for another year," he said.
Good's comments came as he reviewed
the impact of the discovery of Asian soybean rust in some Southern
states. The discovery triggered a flood of commentary about U.S.
soybean acreage and yield prospects in 2005 and beyond. Many believe
that acreage will be reduced in 2005 and that average yields will
also be negatively affected.
"There are clearly more questions
about the impact of soybean rust than answers at this time," said
Good. "The discovery of rust at the end of the 2004 harvest season
means that the industry has some time to analyze alternatives and
make decisions based on the best information and recommendations of
"The first reactions may not reflect
final decisions. One is reminded of the example of soybean aphids in
2003. The early response of many producers was to plan to sharply
reduce soybean acreage in 2004, but that did not happen."
Initially, the acreage response to
soybean rust is anticipated to be most significant in Southern
growing areas, where rust could be most problematic, Good noted.
Soybean area in the 12 Southern states totaled about 11 million
acres in 2004. Reduced acreage in those states in 2005 might be
anticipated as a way for producers to avoid the cost and potential
yield impact of the disease.
"However, sound economic
alternatives for soybeans may be limited due to low prices and
increased cost of production of other crops," Good said. "In
addition, some acreage in those states is already routinely treated
with fungicides for the control of other foliar diseases. Treating
for soybean rust might involve only a marginal increase in
production costs for those areas."
Soybean planting decisions in the
Midwest should be affected by expectations of the probability of
soybean rust in the area in 2005; the cost of treating; the
potential yield impact; and the economics of alternative crops,
"Producers will likely spend the
winter months evaluating these factors and making planting
decisions," said Good. "It is possible for adjustments to be made in
some acreage decisions late in the planning process. One of the
factors that may influence the decision is the rapid increase in the
cost of corn production.
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"Crop production budgets for central
Illinois, for example, indicate that variable costs of corn
production increased about $21 per acre from 2000 to 2004 and might
be another $9 higher in 2005. During the same time period, the
variable cost of soybean production increased by only $4 per acre
and is projected to increase another $4 in 2005, not including any
Good added that another important
factor could be the recent experience of high corn yields relative
to soybeans. If producers anticipate that relationship to continue,
corn would still be an attractive alternative to soybeans, even with
higher production costs. Finally, planting decisions will be
influenced by the relative price of corn and soybeans at planting
time, as well as planting-time weather.
"Planting decisions in the upper
Midwest could be positively influenced by the discovery of soybean
rust in the South," said Good. "On an annual basis, there may be a
lower probability of the occurrence of soybean rust in those
Northern states. Producers there might see expected acreage
reductions in other regions as an opportunity to expand acreage in
"At this juncture, it is difficult
to anticipate the direction and magnitude of soybean acreage change
in 2005. Producers will have to carefully evaluate all of the
decision factors, including production costs and relative yields and
prices of alternative crops."
Given the 960,000-acre increase in
soybean area in Southern states in 2004, it would not be surprising
to see a reduction in 2005, Good noted. Some of that decline could
be offset by the trend increase in soybean area in the upper
Midwest. The USDA's winter wheat seedings report to be released on
Jan. 12 may provide some insight on the potential changes in acreage
of spring-planted crops but will not be very helpful in assessing
the potential mix of those crops.
"The potential yield impact of
soybean rust in 2005 is nearly impossible to anticipate," said Good.
"The impact will presumably be influenced by the geographic extent
of the incidence of the disease, the timing of its occurrence and
the effectiveness of control measures. It is known that the
potential impact is severe if not effectively treated.
"The market will have to work
through the production and price implications of soybean rust in the
United States. In the meantime, rust will again be an issue in
Brazil. The planting season has generally been favorable in Brazil,
but the presence of rust in commercial production has been
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