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"A small increase may be warranted, depending on yield and
consumption expectations," said Darrel Good. "There appears to
be no need for increased soybean acreage, and a small decline
may be warranted, depending on yield expectations. "With
winter wheat seedings down by 4.2 million acres, there does not
appear to be a looming battle for acreage of spring-planted
crops in 2009."
Good's comments came as he reviewed likely acreage decisions
of U.S. corn and soybean producers. "For a significant number of
acres, the planting decisions have not been finalized," he
noted. "Producers continue to wait on additional information
about the cost of spring-applied fertilizer, crop revenue
insurance prices and the likely prices of corn and soybeans
during the 2009-10 marketing year."
The core question is: How many acres of corn and soybeans are
needed in 2009?
"The answer depends on three factors: the level of
consumption next year, the magnitude of stocks at the end of the
current marketing year and U.S. average yields in 2009," he
said. "Acreage decisions, however, will be made before
consumption prospects, stocks and yield are known. The market
must assess those factors and direct appropriate acreage
decisions based on those expectations.
"The difficulty, of course, is that not all market
participants have the same expectations, and expectations
continue to change."
Good said that one useful exercise is to calculate how large
consumption would have to be in 2009-10 to require more corn or
soybean acres than were planted in 2008, under the assumption of
trend yields in 2009 and 2008-09 year-ending stocks at the level
currently projected by the USDA.
"This exercise does not directly address the question of how
many acres of each crop are needed but may shed light on whether
planted acres of either crop needs to increase," he said.
For corn, the USDA estimates that 85.982 million acres were
planted and 78.64 million acres were harvested for grain in
2008. The difference of 7.342 million is marginally larger than
the previous five-year average of 7.263 million due to slightly
more abandonment in 2008.
If 85.982 million acres are planted in 2009, harvested
acreage might be near 78.7 million acres. The U.S. average yield
expectation for 2009 is likely based on a trend yield
calculation. There is no evidence that average yields have
increased at a faster rate in recent years if the trend yield
for 2009 is near 153 bushels per acre.
With unchanged acreage and trend yield, the 2009 crop would
be near 12.4 billion bushels, which is slightly smaller than the
2008 crop.
"The USDA projects 2008-09 marketing year-ending stocks of
corn at 1.79 billion bushels," said Good. "That level of
inventory reflects some surplus that could be used in the
2009-10 marketing year.
"Recently, year-ending stocks have been as low as 1.3 billion
bushels, so the current projection for this year represents a
surplus of at least 490 million bushels."
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Under the scenario outlined here, consumption during the 2009-10
marketing year would have to exceed 12.53 billion bushels in order
to require an increase in planted acreage in 2009.
"That level of consumption is 580 million bushels -- 4.9 percent
-- larger than the USDA's current projection for the 2008-09
marketing year," he said. "If the market believes that trend yield
is larger than 153 bushels, an even larger increase in use would be
needed to require an increase in corn acreage. An expected yield of
155 bushels, for example, would mean that consumption next year
would have to exceed 12.689 billion bushels to require an increase
in planted acreage."
If the Renewable Fuels Standards are binding, a large increase in
ethanol use of corn will occur in the 2009-10 marketing year. If
world wheat production declines from the record level of 2008, U.S.
corn exports will also increase.
"Even with softer feed demand, an increase in use of 600-700
million bushels next year is likely," Good noted.
For soybeans, the USDA estimates that 75.718 million acres of
soybeans were planted and 74.641 million acres were harvested in
2008. The difference of 1.077 million acres is slightly larger than
the five-year average of 895,000.
"If 75.718 million acres are planted in 2009, about 74.8 million
acres would be expected to be harvested," he said. "The calculated
trend yield for 2009 is 42.3 bushels per acre. No change in acreage
and a trend yield in 2009 would point to a crop of 3.164 billion
bushels.
"The USDA projects 2008-09 year-ending stocks of 225 million
bushels, representing a surplus of about 40 million bushels. Use
during the 2009-10 marketing year would have to exceed 3.204 billion
bushels to suggest a need for increased acreage in 2009."
That level of use is 256 million bushels -- 8.7 percent -- larger
than the USDA's current projection of use during the 2008-09
marketing year.
"Use is unlikely to exceed 3.2 billion bushels next year," he
said. "At least, the market should not expect use to be at that
level."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences] |
