 "With production forecasts now available, prospective fall
supplies can be calculated," said Darrel Good.While the 2007
harvest of fall crops is spread over a long period of time, the
magnitude of fall supplies can be represented by the expected
size of the Sept. 1 inventory of the 2006 crops, the Sept. 1
inventory of 2007 crops already harvested and prospective size
of the fall harvest of the primary crops -- corn, soybeans and
sorghum.
The USDA projects the Sept. 1 inventory of corn, soybeans and
sorghum at 1.75 billion bushels.
"We forecast the Sept. 1 inventory of wheat, oats and barley
at 2.16 billion bushels, so that Sept. 1 stocks of the six major
crops may be near 3.91 billion bushels. Stocks of these crops
totaled 4.545 billion bushels on Sept. 1, 2006," he said. The
USDA forecasts production of corn, sorghum and soybeans at
16.154 billion bushels, suggesting a fall crop supply of 20.064
billion bushels. Production of these three crops totaled 14.001
billion bushels in 2006, resulting in a total fall crop supply
of 18.546 billion bushels.
"Excluding rice (fall supplies will be about equal those of a
year ago), these calculations suggest that the 2007 fall crop
supply will be about 1.518 billion bushels larger than the 2006
supply. However, the largest supply, based on the methodology
used here, was in the fall of 2005, when inventories plus
production totaled 19.288 billion bushels. It appears that the
supply this year will be about 776 million bushels (4 percent)
larger than the previous record supply of 2005."
Good noted that additional storage capacity has been added
since the fall of 2005. The USDA provides estimates of on-farm
and off-farm storage capacity each year in the December Grain
Stocks report. Estimates of off-farm capacity exclude, among
others, facilities that are used to store only rice or peanuts,
and capacity at processing facilities that are exclusive to
cottonseed and peanuts.
Crop storage capacity as of Dec. 1, 2006, was estimated at
20.347 billion bushels, 392 million bushels above the Dec. 1,
2005, capacity and 653 million above the Dec. 1, 2004, capacity.
"It is not known how much capacity has been added in 2007,"
he said. "If capacity has been added at the same rate as in
2006, total U.S. capacity this fall may be near 20.739 billion
bushels. That exceeds our calculation of fall crop supplies by
675 million bushels. The calculation of surplus capacity was
1.801 billion bushels last year but only 667 million bushels in
2005.
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 "On the surface, it appears that issues of storage capacity will
not be any more severe than in 2005. The storage challenge in 2005
was further complicated by Hurricane Katrina, which interrupted the
flow of grain through the Gulf. A significant amount of temporary
storage will likely be required again this year but probably not
more than was required in 2004 and 2005."
Regional storage issues could be more severe than implied by the
previous calculations.
"Even in Illinois, however, where combined corn and soybean
production is expected to exceed that of last year by 405 million
bushels, the shortage of storage appears to be no more severe than
in 2004, assuming capacity has been added in 2007 at the same rate
as in 2006," Good said.
One of the results of the anticipated storage crunch this fall
has been the relatively weak basis for harvest delivery. In the
south-central region of Illinois, for example, the average harvest
bid on Aug. 16 was 50 cents under December futures. That compares
with 37 cents on the same date last year, 24 cents in 2005 and 20
cents in 2004. The basis strengthened to 45.5 cents under on Aug. 17
but remains weak by historic standards.
With a 32-cent carry from December 2007 to July 2008 futures, the
average harvest bid is 77.5 cents under July 2008 futures. In each
of the past three years, the basis has strengthened to about 15
cents under July futures by the end of June. It appears that the
market is currently offering about 60 cents per bushel to store corn
from harvest to June in this region of the country.
"Unless the size of the fall harvest exceeds current forecasts,
the corn basis could strengthen quickly after the fall harvest, in
part due to storage demand for corn," Good said.
"Consumption of U.S. corn during the 2007-08 marketing year is
projected at 12.69 billion bushels. The rate of consumption varies
seasonally, but that is an average of nearly 35 million bushels per
day, about 4 million above the average of the past year."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
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