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Did you know, One Bushel of Corn (56 pounds) provides 31.5 pounds of Starch or 33 pounds of Sweetner or 2.8 Gallons of Ethanol
plus
13.5 pounds of Gluten Feed 2.6 pounds of Gluten Meal and 1.5 pounds of Corn Oil
Total corn use for 2008/09 is decreased from last month as projected exports are lowered 50 million bushels to 1.9 billion. Other uses of corn are unchanged. Lower exports increase ending stocks to 1.,124 billion bushels, up 36 million from last month. Higher projected ending stocks, larger foreign grain supplies, and continued declines in cash and futures prices are reducing prospects for 2008/09 prices received by producers. The projected farm price is lowered on both ends of the range to $4.00-$4.80 per bushel, compared with the record $4.20 in 2007/08...click on link below for the full report (PDF) USDA - Feed Outlook, November 13, 2008
Corn Production Down Slightly from September. Soybean Production Up Slightly. Cotton Production Down 1 Percen.t Orange Production Down 10 Percent from Last Season. Corn production is forecast at 12.0 billion bushels, down slightly from the September forecast and 8 percent below 2007. Based on conditions as of October 1, yields are expected to average 153.9 bushels per acre, up 1.6 bushels from September and 2.8 bushels above last year. If realized, this will be the second highest yield on record, behind 2004, and production will be the second largest, behind last year. Yield forecasts are lower than last month across the Ohio and Tennessee Valleys and eastern Corn Belt as dry conditions during September continued to adversely affect the...more
Corn and soybean prices have dropped sharply over the past two weeks, continuing the slide from the early summer peaks. The decline in December 2008 corn futures now exceeds $3.60 and the drop in November 2008 soybean futures is nearly $7.00. Some of the recent decline reflects the larger supplies revealed in the USDA’s September Grain Stocks report. That report revealed September 1, 2008 inventories of soybeans of 205 million bushels. That is about 55 million more than expected after the release of the Census Bureau estimate showing August 2008 crush about 15 million bushels lower than expected. The large year ending inventory resulted in a 91 million bushel increase in the estimated size of the 2007 crop. The increase reflected more acres and higher yields than earlier estimated. It has been clear since January 2008 that the size of the crop had been underestimated as “residual” use of soybeans revealed in the quarterly stocks estimate has been extremely small...more
Prices of corn, soybeans, and wheat started moving higher in the fall of 2006 and have remained generally high and well above average prices in the previous 30 years. These higher prices, and the volatility associated with the higher prices, have resulted in the kind of uncertainty reflected in the quote above. Are higher prices here to stay? If so, what is the expected level and variability of prices during the new era? From a producer's standpoint, the question really is, “What is a good price for corn, soybeans and wheat?” These questions cannot be answered with certainty, but unfolding evidence suggests that prices are indeed likely establishing a higher average than that experienced in recent history. The factors supporting this conclusion include generally tight world inventories, growing world demand for food and biofuels, and escalating costs of production...more
USDA Crop Bulletin (September 30, 2008) Corn: Rain fell in the northeast Corn Belt, accumulating up to 3 inches for
the week in some areas. Elsewhere, conditions remained dry and favorable for
harvest activities. Temperatures across the region ranged from up to 75
degrees Fahrenheit in the southwestern areas down to 60 degrees elsewhere.
Ninety-six percent of the acreage reached or exceeded the dent stage by
week's end, 3 points behind last year and 2 points behind the 5-year average.
Meanwhile, 52 percent of the corn acreage developed to maturity by week's
end, 36 points behind last year and 27 points behind the 5-year average.
Acreage in the central Corn Belt was lagging between 30 and 40 points behind
in most States. Nine percent of the crop was harvested, 20 points behind
last year and 12 points behind the 5-year average. Major delays were evident
in Illinois and Kansas, where harvest was 28 points behind, and in Missouri,
where harvest was 43 points behind the 5-year average harvest pace.
Condition of the crop was rated 61 percent good to excellent, a 2-point
improvement from the previous week's rating...more
Corn and soybean prices continue to be influenced by a wide array of factors, resulting in a very unstable price pattern. Over the past week, December corn futures traded in a range of $.55. In the past seven trading sessions, November soybean futures traded in a range of about $1.20. On a daily basis, prices have been influenced by changes in the value of the U.S. dollar, changes in crude oil prices, export news, weather and production expectations, and developments in the financial markets. In general, a weakening of the U.S. dollar has been viewed as positive for export prospects and therefore for prices of corn and soybeans and a strengthening of the dollar has been viewed as negative for both. Lower crude oil prices are generally viewed as having a negative impact on prices due to the relationship to the price of biofuels and the profitability of biofuels production. Higher crude oil prices, then, are viewed as positive for corn and soybean prices..more
U.S. 2008/09 corn ending stocks are projected higher this month as higher carryin and reductions in food, seed, and industrial use more than offset lower production and higher feed and residual use. Harvested area is raised 100,000 acres based on the June 30 Acreage report. Production, however, is projected 20 million bushels lower at 11.715 billion as the projected yield is lowered 0.5 bushels per acre. As indicated in the Acreage report, heavy June rains and flooding reduced the share of harvested area in the higher- yielding Corn Belt states. Feed and residual use for 2008/09 is raised 50 million bushels based on higher expected pork and poultry production in the first half of the 2008/09 marketing year. Food, seed, and industrial use is lowered 65 million bushels, in line with changes to the 2007/08 marketing year. Ending stocks are projected 160 million bushels higher at 833 million. The 2008/09 marketing year average price received by producers is projected at $5.50 to $6.50 per bushel, up 20 cents on each end of the range. The tighter balance sheet for soybeans and higher soybean prices are expected to drive competition for 2009 acreage keeping cash and futures corn prices relatively strong, but below recent record levels. Ending stocks for 2007/08 are projected 165 million bushels higher with food, seed, and industrial use lowered 65 million bushels and feed and residual use lowered 100 million bushels. Ethanol corn use for 2007/08 is lowered 50 million bushels based on reported delays in plant startups and construction, as well as lower expected plant capacity utilization as indicated by the most recent ethanol production data...more
USDA Weekly Weather and Crop Bulletin - Highlights: Growing conditions took a turn for the worse in the Midwest, despite a marked warming trend. Weekly rainfall totaled at least 4 inches, with isolated totals of 8 inches or more, from the middle Missouri Valley into southern Wisconsin and from central Illinois into the middle Ohio Valley. The torrential Midwestern rain caused widespread river and lowland flooding, halted planting and replanting operations, and washed out some fields. However, Midwestern crops that escaped flooding were aided by the season's first heat wave, which boosted weekly temperatures as much as 5 to 10 degrees F above normal in the southern and eastern Corn Belt. Hot weather also developed elsewhere across the southeastern half of the nation, but chilly conditions persisted across the northern Plains and much of the West...more
Cool weather plagued the Midwestern and Northeastern States, holding weekly temperatures 4 to 12 degrees F below normal and limiting summer crop emergence and development. In addition, showers hampered fieldwork across the southern half of the Corn Belt, but mostly dry weather favored corn and soybean planting in the Great Lakes region. Farther west, heavy rain pounded the northern and central Plains, with at least 4 inches reported in many locations from Montana to Kansas. Although rain generally aided the Plains' winter wheat and emerged summer crops, thunderstorms produced local damage due to large hail, high winds, and isolated tornadoes.
In fact, more than 100 tornadoes struck the central Plains on May 22-23, according to preliminary reports, followed by approximately 50 tornadoes from the southern High Plains into the upper Midwest on May 25. Meanwhile, warm weather promoted rapid crop development across the South, although showers- mainly from the Delta to the southern Atlantic Coast-caused some delays in cotton and peanut planting and other late-spring fieldwork. In southern Florida, however, rain aided wildfire containment efforts. Heat was especially notable in Texas, where temperatures mostly ranged from 4 to 8 degrees F above normal. In contrast, chilly weather returned to the West, accompanied by widespread rain and snow. Precipitation was particularly heavy in the northern Rockies, while showers across the interior Northwest aided winter grains and spring-sown crops. On May 22-23, snow was reported as far south as Arizona, where Flagstaff received 5 inches...more
Corn producers reported intentions to plant 86.014 million acres of corn in 2008, 7.586 million fewer acres than planted last year and 1.37 million less than expected. The intentions to reduce corn acreage is widespread. Among the large producing states, acreage is expected to increase only in Texas. Intended acreage is down one million acres in Iowa, 800,000 in Indiana, and 600,000 in Illinois. If 86 million acres of corn are planted, acreage harvested for grain might be near 78.7 million. With an optimistic U.S. average yield of 155 bushels, production in 2008 would project to about 12.2 billion bushels. That is 755 million less than the projection of use during the current marketing year. Use is expected to remain at least that large in 2008-09...more
USDA Prospective Plantings Report Report, March 1, 2008 - United States corn growers intend to plant 86.0 million acres of corn for all purposes in 2008, down 8 percent from last year when corn planted area was the highest since 1944. Expected acreage is down from last year in most States as favorable prices for other crops, high input costs for corn, and crop rotation considerations are motivating some farmers to plant fewer acres to corn. Despite the decrease, corn acreage is expected to remain at historically high levels as the corn price outlook remains strong due in part to the continued expansion in ethanol production. This was below most industry estimates. Corn on corn requires significantly more fertilizer and ammonia production cost is closely tied to the price of natural gas, and with $9.00 to $10.00 natural gas prices, anhydrous ammonia prices are literally through the roof. Natural gas accounts for approximately 80% of anhydrous ammonia cost, so even with high corn prices, a minor swing to soybeans on corn should not have been that much of a surprise...more
The USDA Prospective Plantings report will be released on Monday, March 31, 2008. Expectations for planting intentions seem to be centering around 87 million acres for corn and 71 to 72 million acres for soybeans. That estimate compares to 2007 acreage of 93.6 million and 63.63 million, respectively. Intentions for spring wheat are expected to exceed last year’s seedings. The planting intentions estimate will provide a benchmark for anticipating actual plantings. Recent price changes that include much lower soybean futures and an extremely weak new crop soybean basis have shifted potential profitability significantly in favor of corn over soybeans in much of the midwest. At the same time, generally cool and very wet conditions in some areas may lead to anticipation of corn planting delays and a swing to more soybean acres. While many producers have locked in the planting decisions for most of their acreage, history reveals some significant differences between intentions and actual planted area. Factor in the uncertainty about growing season weather in the northern hemisphere and the ingredients for large price swings are in place...more
The USDA's February report of U.S. and world crop supply and consumption prospects confirmed prospects for larger exports and smaller year-ending stocks of U.S. soybeans and wheat. Projections of use and stocks of U.S. corn during the current marketing year were unchanged. The new projections underscore the need for large crops in 2008.
Exports of U.S. wheat during the current marketing year are projected at a 12-year high of 1.2 billion bushels, 25 million larger than the January projection. Expected feed use was reduced by five million bushels, resulting in projected year-ending stocks of 272 million bushels, the smallest inventory in 33 years.
Exports of soybeans during the current marketing year are projected at 1.005 billion bushels, 10 million above the January forecast and only 113 million less than the record exports of last year. Exports for the year are expected to be down 10 percent, but shipments during the first five months of the marketing year are running only about 7 percent behind those of a year ago. In addition, unshipped sales as of January 31, 2008 were 48 million bushels (19 percent) larger than unshipped sales of a year ago. The projection of the domestic soybean crush was increased by five million bushels to a total of 1.835 billion, 1.6 percent larger than last year's record crush. Crush during the first four months of the year was 2.2 percent larger than during the same period last year. Year-ending stocks of U.S. soybeans are projected at only 160 million bushels, or 5.3 percent of projected consumption. As a percentage of use, projected stocks are at the second lowest level in 35 years...more
U.S. crop producers made dramatic shifts in acreage in 2007. The shifts were motivated by rising corn-based ethanol production and high corn prices, rising wheat prices, and a surplus of soybeans. The acreage shift was led by a 17 million acre increase in feed grains, including 15.3 million more acres of corn. Winter wheat acreage increased by about 3.1 million and harvested acreage of hay was up by nearly one million acres. These increases were accommodated by an 11.9 million acre decline in soybean plantings, 1.3 million fewer acres of spring wheat, 4.4 million fewer acres of cotton, and about 900,000 fewer acres devoted to other oilseeds; edible beans, peas, and lentils; and sugar beets. In addition to the acreage shifts, total planted acreage (harvested acreage of oats and hay) increased by four million acres. The large increase in total acreage likely includes some pasture acreage converted to row crops and perhaps an increase in re-planted acreage stemming from the spring freeze that damaged the winter wheat crop..more
Corn, soybean, and wheat prices continue to climb as market fundamentals remain generally constructive. Typically, there are both bullish and bearish market fundamental factors and the market must judge the net effect of those factors. Currently, there are few bearish factors to weigh against the combination of strong demand and supply concerns. Futures prices for the 2008 crops of corn, soybeans, and wheat all reached new highs in recent trading sessions...more
The USDA's October Crop Production report confirmed prospects for a small 2007 U.S. soybean harvest. The crop is forecast at 2.598 billion bushels. 590 million smaller than the record crop of 2006. Even with large stocks of old crop soybeans on hand at the beginning of this year, the small crop means that consumption of U.S. soybeans will have to decline by more than 100 million bushels during the current marketing year. That decline is expected to occur in the export market, as large South American supplies will...more
Some of the supporting factors for corn were outlined last week. The case for strong domestic and export demand continues. Congress is considering energy legislation that would significantly increase biofuel mandates. While a cap on corn-based ethanol production may be included in that legislation, the cap would be well above current levels of production. A cap of 15 billion gallons, for example, would eventually require about 5.5 billion bushels of corn, compared to projected use for the current year of 3.2 billion bushels. Legislation being considered presumes heavily on the development of cellulosic ethanol technology that is economically competitive with corn-based ethanol. If that technology is slow in developing, corn-based ethanol demand will remain very strong as long as crude oil prices are high
Corn Stocks Down 34 Percent from September 2006; Soybean Stocks Up 27 Percent; All Wheat Stocks Down 2 Percent - Corn stocks in all positions on September 1, 2007 totaled
1.30 billion bushels, down 34 percent from September 1, 2006. Of
the total stocks, 460 million bushels are stored on farms, down
39 percent from a year earlier. Off-farm stocks, at 844 million
bushels, are down 31 percent from a year ago. The
June - August 2007 indicated disappearance is 2.23 billion bushels,
compared with 2.39 billion bushels during the same period last
year...more
Corn production is forecast at a record 13.3 billion bushels, up 254 million from last month, because of higher yields. The forecast yield of 155.8 bushels per acre would be the second highest ever. Sorghum yields are also forecast at a record 73.9 bushels per acre. Sorghum production is forecast at 495 million bushels. Ethanol production forecast was lowered for both 2006/07 and in 2007/08, based on current capacity and reported production. Exports were raised this month to offset lower grains production in other parts of the world. Prices for feed grains remain strong, supported by record wheat and strong soybean prices...more Feed Outlook,
September 14, 2007
The USDA now forecasts the 2007 U.S. corn crop at 13.308 billion bushels, 254 million (1.9 percent) larger than the August forecast and 2.773 billion (26.3 percent) larger than the 2006 crop. The larger crop forecast reflects the expectation of a U.S. average yield of 155.8 bushels. That forecast is three bushels above the August forecast and 6.7 bushels above the 2006 average, but 4.6 bushels below the record yield of 2004...more
National Weather Summary June 24 - 30, 2007, National Agricultural Statistics Service (NASS), Agricultural Statistics Board, U.S. Department of Agriculture.
Highlights: Rainfall expanded and intensified across the southeastern Plains, causing widespread flooding and fieldwork disruptions. The quality of unharvested winter wheat in the flood-affected areas continued to decline. In contrast, warm, mostly dry weather across the northwestern half of the Plains promoted winter wheat maturation and rapid summer crop development.
Meanwhile, beneficial showers continued across the previously parched Ohio and Tennessee Valleys, locally stabilizing crop conditions. A second consecutive week of showery weather was also highly beneficial in much of the eastern Corn Belt, where pastures and late-planted summer crops had begun to exhibit signs of drought stress. Farther south, drought continued to severely stress pastures and rain-fed summer crops in most areas from the Delta to the southern Atlantic States, despite scattered showers.
Elsewhere, hot, dry weather prevailed across much of the West, maintaining heavy irrigation demands and contributing to an increase in wildfire activity.
At least 4 inches of rain fell from central Texas into central Missouri, with local totals in excess of a foot. In southeastern Kansas, 7-day (June 25 - July 1) totals topped 18 inches in locations such as Fredonia (18.79 inches) and Yates Center
(18.29 inches). Chanute, KS, netted 13.68 inches during the same period. Resultant flooding along the Verdigris River reached record proportions on July 1 in Coffeyville (12.17 feet above flood
stage) and near Independence (22.40 feet above flood stage).
Later, the Verdigris River near Lenapah, OK, crested 12.89 feet above flood stage on July 2, surpassing the May 1943 standard by
2.45 feet.
Farther south, record flooding also affected several Texas locations, including the Leon River near De Leon (7.78 feet above flood stage on June 27) and the Wichita River near Wichita Falls (6.40 feet above flood stage on June 30). Elsewhere in Texas, Dallas-Ft. Worth (11.10 inches, or 344 percent of normal) achieved its second-wettest June behind 11.58 inches in 1928, while Austin
(Bergstrom) completed its wettest January-June period on record
(31.71 inches, or 179 percent of normal; previously, 30.84 inches in 1992). It was also Dallas-Ft. Worth's wettest month since May 1982, when 13.66 inches fell. Meanwhile in Missouri, Joplin
(17.12 inches, or 316 percent of normal) easily surpassed its former June rainfall record of 14.12 inches, set in 1932.
In contrast, downtown Los Angeles, CA, completed its driest July 1 - June 30 period on record, with a water-year total of just
3.21 inches (21 percent of normal). Previously, the driest water year in Los Angeles was 2001-02, when 4.42 inches fell. Water-year records were also established in several other southern California locations, including Long Beach (2.10 inches, or 16 percent of normal), Lancaster (1.40 inches, or 19 percent), and Palmdale
(0.65 inch, or 9 percent). Records in Lancaster and Palmdale had stood since 1960-61. Farther east, January 1 - July 2 precipitation totals were the lowest on record in northern Alabama locations such as Huntsville and Muscle Shoals. Huntsville's year-to-date total of 12.51 inches (40 percent of normal) clipped its 1925 mark of 14.87 inches, while Muscle Shoals' sum of
11.97 inches (39 percent) edged its 1941 standard of 12.51 inches.
Elsewhere in the Southeast, however, locally heavy showers produced daily-record totals in several locations, including West Palm Beach, FL (3.95 inches on June 29), and Paducah, KY (3.02 inches on June 30).
Chilly weather lingered across the Northwest early in the week, resulting in several daily-record lows. In Oregon, records for June 25 included 34 degrees F in Mitchell and 36 degrees F in Monument. A day later, record lows for June 26 dipped to
29 degrees F in Meacham, OR, and 31 degrees F in Kalispell, MT. By June 28, however, Kalispell (92 degrees F) posted a daily-record high. Elsewhere in Montana, June record-tying highs on June 28 included 100 degrees F at Belgrade Field, 98 degrees F in Missoula, and 94 degrees F in Butte. Farther east, heat briefly affected the High Plains and the Northeast. Selected daily-record highs included 107 degrees F (on June 25) in Chadron, NE; 100 degrees F (on June 24) in Denver, CO; and 96 degrees F (on June 26 and 27) in Burlington, VT. By week's end, however, cooler air arrived in the Northeast, while heat expanded across the West. Casper, WY
(99 degrees F), posted a daily-record high on June 29, followed the next day by a record high of 117 degrees F in Indio, CA.
Hawaiian showers were mostly light and confined to windward locations. On the Big Island, measurable rain fell in Hilo on 23 of the last 24 days in June, totaling 6.38 inches. However, Hilo's June rainfall, also 6.38 inches, was only 87 percent of normal.
Elsewhere, the first half of 2007 featured rainfall totals of just 3.90 inches (35 percent of normal) in Kahului, Maui, and
2.66 inches (29 percent) in Honolulu, Oahu. Farther north, scattered showers accompanied near-normal temperatures in Alaska.
In Anchorage, a 1.09-inch total on June 24-25 prevented a very dry month; its June total of 1.10 inches was 104 percent of normal.
Elsewhere in southern Alaska, however, Valdez (0.34 inch, or
11 percent of normal) completed its driest June since 1968, when
0.12 inch fell.
National Agricultural Summary
June 25 - July 1, 2007
Portions of the northern and central Pacific Coast received some light, scattered moisture, while the rest of the West remained dry requiring continued irrigation of summer crops. Drying down of winter wheat continued across the region while wild fire risk remained elevated. Warmer than average and dry weather in the northern Great Plains contrasted sharply with the heavy showers and thunderstorms across areas of the central and southern Great Plains. Areas from Texas stretching north to eastern Kansas again received heavy precipitation keeping field work at a standstill due to excessively wet fields and flooding in some areas. Farther east, in the Corn Belt, rainfall and above average temperatures improved pastures and development of summer crops. The Ohio Valley and mid-Atlantic regions also received needed moisture and favorable temperatures to aid in development of summer crops. Across the Delta, and into the Southeast, temperatures reached the high 90's, providing heat units for maturation.
Corn: Thirteen percent of the acreage was at or beyond the silking stage, 4 points ahead of last year and the 5-year average. Silking was most advanced in Tennessee, at 75 percent, while in North Carolina and Texas, 74 and 61 percent, respectively, of the crop was at or beyond this stage. Progress was ahead of the normal pace in most States but lagged slightly behind normal in Colorado, Kansas, Pennsylvania, and Texas. Silking had not yet begun in Michigan and South Dakota. Seventy-three percent of the crop was rated good or excellent nationwide, same as the previous week.
Soybeans: Blooming advanced to 19 percent, 2 points ahead of last year and 6 points ahead of the normal pace. With the exception of Kansas and Missouri, crop progress was at or ahead of normal in all States. In the Delta, the crop was 22 points ahead of normal in Louisiana and 17 points ahead of normal in Mississippi.
Nationwide, the amount of the crop rated good or excellent
increased 2 percentage points from last week, to 68 percent.
June 30, 2007 - Acreage National Agricultural Statistics Service
Washington, D.C. Released June 29, 2007, by the National Agricultural Statistics Service (NASS), Agricultural Statistics Board, U.S. Department of Agriculture,USDA. For information on "Acreage" call (202) 720-2127, office hours 7:00 a.m. to 4:30 p.m. ET.
Corn Planted Acreage Up 19 Percent from 2006
Soybean Acreage Down 15 Percent
All Wheat Acreage Up 6 Percent
All Cotton Acreage Down 28 Percent
Corn planted area for all purposes is estimated at 92.9 million acres in 2007, up 19 percent from 2006 and 14 percent higher than 2005. Farmers increased corn plantings 3 percent from their March intentions, resulting in the highest planted area since 1944 when 95.5 million acres were planted for all purposes. Wet conditions during March and April delayed field preparations and planting activities in the Corn Belt and Great Plains. Conditions dried out considerably in the eastern Corn Belt and Ohio Valley during May allowing producers to make good planting progress, but the lack of precipitation reduced topsoil moisture and increased stress on the crop. Meanwhile, excessive rainfall in parts of the western Corn Belt, central and southern Great Plains, and middle Mississippi Valley during much of May continued to hamper fieldwork. Despite the weather related delays, growers made rapid progress and planting was completed ahead of the average pace. Farmers reported that 99 percent of the intended corn acreage had been planted at the time of the survey interview which is slightly above the average for the past 10 years.
The 2007 soybean planted area is estimated at 64.1 million acres, down 15 percent from last year's record high. Area for harvest, at 63.3 million acres, is also down 15 percent from 2006. This is the lowest planted and harvested area for soybeans since 1995. With the exception of New York, Pennsylvania, and the Southeast States, planted acreage decreased in all States across the country. Growers in Illinois and Iowa showed the largest decrease in soybean acreage from last year, down 1.75 million acres and 1.35 million acres, respectively. Large declines in soybean area occurred across the Corn Belt and Great Plains, with planted acreage also down more than one million acres from last year in Indiana, Minnesota, and Nebraska. Many farmers across the country shifted to planting more corn this year at the expense of soybeans. However, increases in soybean area occurred across the Southeast, where some farmers shifted from cotton to corn and soybeans. New York and Pennsylvania both set new record high planted areas, at 215,000 and 440,000 acres, respectively. Nationally, farmers reported that 88 percent of the intended soybean acreage had been planted at the time of the survey interview, compared with the average of 81 percent for the past 5 years. All wheat planted area is estimated at 60.5 million acres, up 6 percent from 2006.
The 2007 winter wheat planted area, at 45.1 million acres, is 11 percent above last year and up 1 percent from the previous estimate. Of this total, about 32.4 million acres are Hard Red Winter, 8.80 million acres are Soft Red Winter, and 3.91 million acres are White Winter. Area planted to other spring wheat for 2007 is estimated at 13.1 million acres, down 12 percent from 2006. Of this total, about 12.6 million acres are Hard Red Spring wheat. The Durum planted area for 2007 is 2.23 million acres, up 19 percent from the previous year.
All Cotton plantings for 2007 are estimated at 11.1 million acres, 28 percent below last year and the lowest since 1989. Upland planted area is estimated at 10.8 million acres, also down 28 percent from 2006. Lower upland planted acres are estimated for nearly all States with the largest decline in Texas, at 1.40 million acres below 2006. Large decreases in acreage also occurred in the Southeast and Delta regions. American-Pima cotton growers planted 298,000 acres, down 9 percent from last year. This report was approved on June 29, 2007. Secretary of Agriculture Mike Johanns
June 30, 2007 - Grain
Stocks, National Agricultural Statistics Service
Released June 29, 2007, by the National Agricultural Statistics
Service (NASS), Agricultural Statistics Board, U.S. Department of
Agriculture. For information on "Grain Stocks" call (202)
720-2127, office hours 7:30 a.m. to 4:00 p.m. ET.
Corn Stocks Down 19 Percent from June 2006
Soybean Stocks Up 10 Percent
All Wheat Stocks Down 20 Percent
Corn stocks in all positions on June 1, 2007 totaled 3.53 billion
bushels, down 19 percent from June 1, 2006. Of the total stocks,
1.83 billion bushels are stored on farms, down 22 percent from a
year earlier. Off-farm stocks, at 1.71 billion bushels, are down
15 percent from a year ago. The March - May 2007 indicated
disappearance is 2.53 billion bushels, compared with 2.63 billion
bushels during the same period last year.
Soybeans stored in all positions on June 1, 2007 totaled
1.09 billion bushels, up 10 percent from June 1, 2006 and the
largest June 1 stocks on record. On-farm stocks totaled
500 million bushels, up 1 percent from a year ago. Off-farm
stocks, at 591 million bushels, are up 19 percent from the previous
year. Indicated disappearance for the March - May 2007 quarter
totaled 696 million bushels, up 3 percent from the same period a
year earlier.
All wheat stored in all positions on June 1, 2007 totaled
456 million bushels, down 20 percent from a year ago. On-farm
stocks are estimated at 73.2 million bushels, down 34 percent from
last year. Off-farm stocks, at 383 million bushels, are down
17 percent from a year ago. The March - May 2007 indicated
disappearance is 401 million bushels, up slightly from the same
period a year earlier.
Durum wheat stocks in all positions on June 1, 2007 totaled
21.6 million bushels, down 47 percent from a year ago. On-farm
stocks, at 8.95 million bushels, are down 61 percent from
June 1, 2006. Off-farm stocks totaled 12.6 million bushels, down
27 percent from a year ago. The March - May 2007 indicated
disappearance of 17.3 million bushels is down 31 percent from the
same period a year earlier.
Barley stocks in all positions on June 1, 2007 totaled 68.9 million
bushels, down 36 percent from June 1, 2006. On-farm stocks are
estimated at 14.6 million bushels, 53 percent below a year ago.
Off-farm stocks, at 54.4 million bushels, are 30 percent below
June 1, 2006. The March - May 2007 indicated disappearance is
48.1 million bushels, 18 percent below the same period a year
earlier.
Oats stored in all positions on June 1, 2007 totaled 51.2 million
bushels, 3 percent below the stocks on June 1, 2006. Of the total
stocks on hand, 18.4 million bushels are stored on farms,
27 percent lower than a year ago. Off-farm stocks totaled
32.8 million bushels, 20 percent above the previous year.
Indicated disappearance during March - May 2007 totaled
19.9 million bushels, compared with 22.3 million bushels during the
same period a year ago.
Grain sorghum stored in all positions on June 1, 2007 totaled
74.9 million bushels, down 35 percent from a year ago. On-farm
stocks, at 5.38 million bushels, are down 57 percent from last
year. Off-farm stocks, at 69.5 million bushels, are down
32 percent from June 1, 2006. The March - May 2007 indicated
disappearance from all positions is 67.3 million bushels, down
14 percent from the same period last year.
Pulse crops stored in all positions on June 1, 2007 and the change
from June 1, 2006 are: dry edible peas, 1.37 million cwt, down
36 percent; lentils, 554 thousand cwt, down 69 percent; Austrian
winter peas, 132,000 cwt, down 36 percent; all chickpeas,
377,000 cwt, up 122 percent; small chickpeas, 47,000 cwt, up
18 percent; and large chickpeas, 330,000 cwt, up 154 percent.
Small chickpeas are defined as peas that will pass through a
20/64 inch round hole screen.
This report was approved on June 29, 2007.
June 25, 2007 - ANTICIPATING JUNE GRAIN STOCKS ESTIMATES
Corn and soybean prices are being directed mostly by weather and crop conditions in the U.S. The USDA’s Acreage and Grain Stocks reports to be released on June 29 will provide additional fundamental information for these markets. Last week’s issue focused on the Acreage report. This issue focuses on the likely estimates of June 1 stocks of soybeans and corn.
June 1 stocks of soybeans and corn are anticipated based on the estimates of consumption during March, April, and May. Consumption information for that period, however, is incomplete, so the pre-report projection of the June 1 inventory is based on a combination of known and projected consumption.
For soybeans, Census Bureau estimates of the domestic crush are available for March and April, but the May estimate will not be released until June 28. The crush in March was 4.2 percent larger than in the previous year, while the April 2007 crush was 6.9 percent larger than the crush in April 2006. We anticipate a May crush of about 150 million bushels, 2.6 percent larger than he crush in May 2006. Crush for the quarter was likely near 450 million bushels. Census Bureau export estimates are available through April, while USDA estimates are available through May. Those estimates suggest that soybean exports during the March-May quarter totaled about 210 million bushels.
The most difficult category of use to anticipate is seed, feed, and residual use. The quarterly distribution of use in that category varies substantially from year to year and can be influenced by any errors in the estimate of the crop size. Estimates of use in this category were extremely large in each of the first two quarters of the current marketing year, suggesting that the 2006 crop may have been over estimated. If third quarter use was near 50 million bushels, the average of the past two years, total use during the quarter should have been near 710 million bushels, leaving June 1 stocks of about 1.075 billion bushels. Stocks at that level would be 84 million bushels larger than the record inventory of a year ago.
For corn, Census Bureau estimates of exports are also available through April and USDA estimates are available through May. Those estimates suggest that exports during the March-May quarter should have been near 500 million bushels.
Estimates of domestic use of corn are not as readily available. No estimate of feed and residual use is available on an ongoing basis. Use in that category is calculated after the estimate of stocks at the end of the quarter is available. Use for the quarter, then, is projected based on the level of use projected by the USDA for the entire year and a typical seasonal distribution of use. For the current year, the USDA projects feed and residual use at 5.85 billion bushels, 4.7 percent less than use during the previous year. Apparent feed and residual use during the first half of the current year totaled 3.716 billion bushels, 4.2 percent less than use during the first half of the 2005-06 marketing year. Use was down 2.5 percent in the first quarter and 6.5 percent in the second quarter. To reach the USDA projection for the year, use during the last half of the current marketing year needs to be 2.134 billion bushels, 5.7 percent less than use of a year earlier. If use is proceeding at that pace, consumption during the third quarter would have been near 1.215 billion bushels.
Estimates of domestic processing use of corn are not easily attainable on an ongoing basis, so the projection of third quarter use is made in the same fashion as the projection of feed and residual use. For the year, the USDA projects use in this category at 3.525 billion bushels, 18.2 percent more than used last year. The pace of use, however, should be increasing as the year progresses as new ethanol plants come on line. Use during the first two quarters of the 2006-07 marketing year was 13.6 percent and 15.5 percent larger, respectively, than use during the same quarters last year. Use during the last half of the year needs to be 21.5 percent larger than use of a year ago in order to reach the USDA projection. Third quarter use, then, should have been near 925 million bushels.
Based on the methodology used here, consumption of corn during the third quarter of the 2006-07 marketing year should have totaled about 2.64 billion bushels, leaving June 1 stocks of about 3.43 billion bushels, 930 million less than the inventory of a year ago. A substantial deviation from that level might require the USDA to alter the projection of domestic use for the year. Last year, for example, the June 1 stocks of corn was 100 million bushels less than anticipated, resulting in a 100 million bushel increase in the projection of feed and residual use for the year.
Issued by Darrel Good
Extension Economist
University of Illinois
06.18.07 -UPCOMING USDA REPORTS TAKE ON MORE IMPORTANCE
On June 29, the USDA will release the annual Acreage report and the quarterly Grain Stocks report. These reports take on a little more importance for corn, soybeans, and wheat this year for a variety of reasons. These include the rapid rate of increase in consumption; the low and/or declining level of world grain inventories; and concerns about production in a number of acres, particularly in the U.S. A difference of a few acres planted or a few bushels in inventory could have significant price implication in this environment. This issue highlights the Acreage report and next week’s issue will address the June 1 Grain Stocks report.
The markets will be interested in at least three pieces of information in the Acreage report. First, is the total planted acreage (harvested acreage of hay) of all crops. Intentions for all non-hay crops reported in January (winter wheat) and March (most other crops) totaled 256.37 million acres, 3.26 million more than planted to those crops in 2006. In addition, acres of hay intended for harvest in 2007 was 2.25 million more than harvested in 2006. It will be important to see if planted acreage was nearly 2 percent more than planted in 2006, as indicated in March, or if adverse weather resulted in fewer planted acres. The comparison to 2006 acreage may be made a little more difficult if failed acres of wheat, for example, were replanted to another crop. A state-by-state analysis of acreage will help shed some light on that issue.
The second important piece of information in the Acreage report is obviously the estimates of planted acreage of individual crops. A lot of the focus will be on corn and soybeans. In March, producers reported intentions to increase planted acreage of corn by 12.1 million acres (15 percent) and to reduce planted acreage of soybeans by 8.4 million acres (11 percent). There are clear differences of opinion about actual planted acres relative to these intentions. A review of the weekly reports of corn planting progress by state reveals no significant delays in planting that crop. In all major states, the majority of the crop was planted by the second week of May, with planting essentially complete by the third week of May. Generally timely planting opportunities, then, do not point to a significant change in acreage from intentions based on concerns about potential yield loss from late planting.
From early March, when the survey of planting intentions was conducted, through late April, December 2007 corn futures declined about $.50. Prices were generally higher, but volatile, during the first half of May. In contrast, November 2007 soybean futures increased about $.20 per bushel from early March to late April, but dropped by $.60 during the month of May. Again, opinions differ about whether the changing price relationships influenced producers planting decisions. It would be surprising if planting decisions were significantly influenced by the short duration of price variability.
The third piece of information to be gleaned from the Acreage report will be intentions for harvested acreage of individual crops. While it is early in the production cycle for spring planted crops, it will be useful to see if early season weather conditions had yet impacted the expected level of abandoned acres. Drought conditions in the southeast and excessive precipitation in parts of western growing areas could have impacted not only the magnitude of planted acreage, but also the expectation for abandoned acres.
Trade guesses about planted acreage will be released leading up to the USDA report. Our expectation is that total planted acreage fell a little short of March intentions and that harvested acreage forecasts will show a little higher rate of expected abandonment in areas of adverse weather conditions. Both corn and soybean acreage may have been a bit below intentions, but we do not anticipate the report to slow a significant “switch” in acreage between the two crops.
Even though acreage estimates will be important, yield prospects will continue to dominate corn, soybean, and wheat prices. Continuation of generally dry conditions in eastern and southeastern growing areas is of most concern. Along with actual and forecast weather conditions, the USDA’s weekly report of crop conditions will be monitored closely. Deteriorating crop conditions in eastern growing areas were expected to be reported in the June 18 update. Historically, weather concerns such as those currently being experienced have resulted in price highs in June or July.
Issued by Darrel Good
Extension Economist
University of Illinois
May 2007 - 2007 U.S CORN PRODUCTION RISKS: WHAT DOES HISTORY TEACH US? Issued by Darrel Goodadn Scott Irwin,
Extension Economist
University of Illinois
INTRODUCTION
From May to October each year, the corn market typically finds direction from the prospective size of the U.S. corn crop. Expectation about crop size starts with the USDA's March Prospective Plantings report, changes with the USDA weekly reports of planting progress and crop conditions and the June Acreage report, and culminates with the USDA monthly production forecasts beginning in August. Corn prices are especially sensitive to the prospective size of the U.S. crop in years when stocks are relatively low and/or in years of robust demand for corn. During those periods, a substantial shortfall in production would be very disruptive to the corn market, require significant adjustments by end users, and have the potential to increase food prices. Instances of substantial shortfalls in the size of the U.S. crop when stocks were low and demand was strong have been rare (1974 and 1995), but years with the potential for such an occurrence have been more numerous. The current year is one of those years. Market participants are highly sensitive to prospective crop size and corn prices have been quite volatile early in the 2007 production cycle. It may be very helpful, then, to provide an early assessment of potential U. S. corn production in 2007 and the likely impact on corn prices and the implications for market participants and policy makers.
SETTING
The current U.S. corn market is generally characterized by four factors: 1) rapidly expanding consumption due primarily to increasing quantities of corn used for ethanol production, 2) declining inventories, 3) high prices, and 4) reported intentions to increase planted acreage.
The USDA estimates that corn used for ethanol production totaled 1.323 billion bushels in the 2004-05 marketing year and 1.603 billion bushels in the 2005-06 marketing year. Use is projected at 2.15 billion bushels during the current marketing year. The Renewable Fuels Association reported that as of May 8, 2007, 118 bio-refineries were in operation with annual production capacity of 6.1 billion gallons of ethanol. In addition, eight existing plants were expanding capacity and 79 plants were under construction. Those additions were estimated to have annual production capacity of 6.4 billion gallons. The USDA's World Agricultural Outlook Board (WAOB) forecasts that 3.4 billion bushels of corn will be used for ethanol production in the 2007-08 marketing year. In the very near future, annual ethanol production capacity will exceed 12.5 billion gallons. If corn remains the predominant feed stock for ethanol production, nearly 4.5 billion bushels could be used annually (assuming a conversion ratio of 2.8 gallons of ethanol per bushel of corn) beginning late in the 2007-08 or early in the 2008-09 marketing year.
Year-ending stocks of U.S. corn reached a 17-year high of 2.114 billion bushels on September 1, 2005, but stocks were at 1.967 billion bushels on September 1, 2006, and the USDA projects stocks on September 1, 2007 to be only 937 million bushels. Consumption during the 2006-07 marketing year is expected to be a record 11.575 billion bushels, 1.04 billion more than produced in 2006. As a result of prospects of declining inventories and the need for U.S. producers to plant more corn in 2007, corn prices moved sharply higher beginning in September 2006. July 2007 corn futures increased from about $2.70 in September 2006 to a high of $4.60 in February 2007. U.S. producers responded to the high prices, reporting intentions to plant 90.454 million acres of corn in 2007, 12.1 million more than planted in 2006. Prices moved lower following the report of those intentions, but December 2007 futures remained near $3.70 in mid-May, at the extreme high end of the historical range of prices for this time of year.
If all of the intended corn acreage is planted, acreage not harvested for grain is near a normal level, and the U.S. average yield is near a trend value, the 2007 corn crop would be near 12.29 billion bushels. Such a crop would be 16.7 percent larger than the 2006 crop and 4.1 percent larger than the record crop of 2004. Even such a large crop, however, would not be large enough to accommodate the current level of domestic feed use (5.85 billion bushels), exports (2.2 billion bushels), processing uses (3.525 billion bushels), and an expected 1.25 billion bushel increase in ethanol use of corn during the 2007-08 marketing year. With slow planting progress early in the season, there was some concern that not all of the intended acreage would get planted and/or the U.S. average yield could be below trend in 2007. However, planting was progressing at a normal pace by May 13. Any substantial shortfall in production would not only result in a further reduction in domestic inventories, but could require some reduction in the anticipated level of consumption. Prices would have to be high enough to force such a reduction. The concern is that supplies could be small enough to require large reductions in use, very high corn prices, and escalating food prices. At the extreme, shortfalls could be large enough to bring government intervention into the allocation process.
ESTIMATING PRODUCTION RISK
Production risk is defined here as the potential difference between actual production and expected production. The methodology used here to quantify that risk is to calculate the probability distribution of the historical differences between actual production and expected production in the spring of the year. The period 1970 through 2006 is used to calculate that historical distribution of the differences. Actual production is the USDA estimate of crop size in the January Crop Production report released following harvest. For the purposes of this analysis, expected production in the spring of the year is calculated in a three step process. First, expected planted acreage is the acreage intended to be planted as reported by the USDA in the March Prospective Plantings report. Second, expected harvested acreage for grain is calculated as acreage intended to be planted minus the 5-year moving average difference between actual planted acreage and acreage harvested for grain. Third, expected harvested acreage is multiplied by the U.S. average trend yield. The trend yield is calculated as the linear trend of actual yields from 1960 through the year previous to the current year. For example, the trend yield for 1970 is calculated from actual average yields from 1960 through 1969. For 1971, the trend is calculated from actual yields from 1960 through 1970, and so on.
Some might argue that a higher trend yield estimate should be used for more recent years since yields have increased at a faster rate since 1996. The argument is that increases in the U.S. average yield has been accelerated by more rapid development and adoption of new technology, particularly in the form of improved seed genetics. However, careful examination of state average yield data for Illinois , Indiana , and Iowa since 1996 suggests that the increasing trend value has resulted from generally more favorable growing season weather conditions in the Corn Belt rather than an increased rate of technology development or adoption. Technology may currently be developing and adopted at a faster rate than in the past and could eventually result in an accelerated trend increase in corn yields, but the effects were not yet observed through 2006. For now, the long-term linear trend is likely still the best forecast of expected yield prior to the growing season and is used in this analysis.
An alternative methodology for determining expected production is to simply use the WAOB production forecast made in May of each year. While the WAOB procedure for calculating the May forecast (expected production) has changed some over time, the general procedure is similar to that used here. The WAOB production forecast is based on planting intentions, an expectation for harvested acreage based on the historical relationship between planted and harvested acreage, and an expected yield based on trend. That forecast has been made each year since 1975. The differences between actual and expected production from 1975 through 2006 using the WAOB forecast are highly correlated (+0.96) to the differences using the methodology in this paper. The distribution of differences between actual and expected production, in 10 percent increments, is also very similar for the two methodologies. The advantages of using the methodology outlined for this paper are: 1) the calculation of expected production can be made sooner, with the release of the Prospective Plantings report, and 2) the methodology has had a smaller forecast error than the WAOB methodology.
The calculation of annual differences between actual and expected U.S. corn production from 1970 through 2006 is shown in the data appendix and a plot of the differences over time is presented in Figure 1. The frequency distribution of those differences, in increments of 10 percentage points, is depicted in Figure 2. Since 1970 (37 years), actual U.S. corn production relative to expected production in the spring has been as follows:
10 to 20 percent larger----5 years—13.5%
0 to 10 percent larger---17 years---45.9%
0 to 10 percent smaller-- 8 years---21.6%
10 to 20 percent smaller-- 3 years--- 8.1%
20 to 30 percent smaller---1 year-----2.7%
30 to 40 percent smaller---1 year-----2.7%
More than 40 percent smaller----2 years---5.4%
Actual production was larger than expected production in 22 years and smaller in 15 years. Actual production was within 10 percent of expected production in 25 of the 37 years (67.5 percent). The distribution of the differences, however, is skewed to the left, meaning that there were more extreme shortfalls in production than there were extreme positive differences in actual and expected production. The annual percentage differences between actual and expected production, ordered from low to high, are shown in Table 1. Production was more than 40 percent below expected production in 1974 and in 1988. The largest positive difference, 16.7 percent, was in 1979.
On average, most of the historical difference between actual and expected production was due to the difference between actual and expected (trend) yield rather than the difference between actual and expected harvested acreage. The relationship between the difference in expected production and the difference in expected yield is shown in Figures 3. While there were a few exceptions, the two differences have been highly correlated. As a result, probability distributions are similar for the two differences and the current analysis could be conducted with either. We have used the distribution of production differences in order to make use of all information.
EXPECTED PRODUCTION DISTRIBUTION FOR 2007
For 2007, expected U.S. corn production is calculated as:
(90.454 million acres planted minus 7.772 million acres not harvested for grain) X 148.6 bushels per acre = 12.29 billion bushels.
This calculation is smaller than the expected production forecast of 12.465 billion bushels used by the USDA's World Agricultural Outlook Board in the May 11, 2007 issue of World Agricultural Supply and Demand Estimates. That forecast used a trend yield calculation of 150.3 bushels, slightly higher than the trend calculation used here.
Using 12.29 billion bushels as the expected production in 2007, a 10 percent difference from actual production is 1.229 billion bushels. Actual crop size in increments of 10 percent difference from expected production would be:
+20 percent = 14.75 billion bushels
+10 percent = 13.52 billion bushels
-10 percent = 11.06 billion bushels
-20 percent = 9.83 billion bushels
-30 percent = 8.60 billion bushels
-40 percent = 7.37 billion bushels
Since the largest positive difference between actual and expected production has been 16.7 percent, 14.34 billion bushels is used as the upper end of the production distribution for 2007. Similarly, since the largest negative difference between actual and expected production has been 40.5 percent, 7.36 billion bushels is used as the lower end of the production distribution.
The probability distribution of expected production for 2007, then, based strictly on the historical differences between actual and expected production is as follows:
13.52 to 14.34 billion----13.5%
12.29 to 13.52 billion—-45.9%
11.06 to 12.29 billion-----21.6%
9.83 to 11.06 billion-----8.1%
8.60 to 9.83 billion-------2.7%
7.37 to 8.60 billion-------2.7%
7.36 to 7.37 billion-------5.4%
Based on historical distributions, there is a 67.5 percent probability that the 2007 crop will be between 11.06 billion and 13.52 billion bushels, or within 10 percent of expected production. There is an 18.9 percent chance of a crop smaller than 11.06 billion bushels, which would require substantial rationing of use, and a 13.5 percent chance of a crop larger than 13.52 billion bushels, which would likely lead to a build-up of inventories during the 2007-08 marketing year.
It could be argued that a conditional probability distribution for the difference between actual and expected production in 2007 should be constructed based on information already known about 2007 yield potential. That is, based on such factors as planting progress, weather conditions to date, and the National Weather Service forecast for general summer weather conditions, one might delete some historical observations on the difference between actual and expected production, arguing that the conditions that existed in those years have already been precluded from happening in 2007, and then recalculate the probability distribution. We have chosen not to attempt to calculate such a conditional probability for two reasons. First, not enough is yet known to completely defend the deletion of any historical observations. Second, there are only two years that might be strong candidates for elimination (1988 and 1993). Production in 1988 (drought) was 40.4 percent less than expected and production in 1993 (flood) was 33.2 percent less than expected. Deleting those two years would reduce the probability of production in 2007 falling more than 30 percent below expected production from 8.1 percent to 2.9 percent. The probability is relatively small in both cases and the difference does not substantially influence the choice of production scenarios to consider for 2007.
PRODUCTION SCENARIOS
There will be important consumption, price, and perhaps policy implications of the actual size of the 2007 U.S. corn crop. Those implications may be very different for a crop near the expected level, a crop much smaller than expected, and a crop much larger than expected. The implications of four possible scenarios are briefly examined here— a crop at the expected level (12.29 billion bushels), a crop 10 percent larger than expected (13.519 billion bushels), a crop 10 percent smaller than expected (11.061 billion bushels), and a crop 20 percent smaller than expected (9.832 billion bushels). The range from 10 percent above expected production to 20 percent below expected production acknowledges the higher probability of a large negative difference in actual and expected production relative to the probability of a large positive difference in actual and expected production and covers about three-quarters of the historical distribution. A scenario for a “bumper” crop that exceeds 10 percent of expected production is not developed, but the results of such a crop would include, lower prices, larger consumption, and larger year-ending stocks than projected under the scenario of a crop 10 percent larger than expected. Similarly, a scenario for a “disaster” crop that is more than 20 percent below expected production is not developed, but the implications of such a crop are discussed. For each production scenario, a 2007-08 marketing year balance sheet projecting supply, consumption by category, year-ending stocks, and marketing year average farm price is developed. The rational for the consumption and price projections are presented along with a brief discussion of the possible implications for market participants and the possible policy implications, particularly the implications of a very small crop.
CONSUMPTION AND PRICE IMPLICATIONS
Potential supply and consumption balance sheets for the 2007-08 U.S. corn marketing year for each of the four production scenarios developed in the previous section – 12.29 billion bushels, 13.519 billion bushels, 11.061 billion bushels, and 9.832 billion bushels are presented in Table 2. The consumption projections for the scenario reflecting expected crop size (12.29 billion bushels) are similar to the May, 11, 2007 projections by the USDA's WAOB.
U.S. corn during the 2007-08 marketing year. Based on the pace of construction of processing capacity, the USDA projects a 1.25 billion bushel increase in corn used for ethanol production, to a total of 3.4 billion bushels. Other processing uses would likely be near 1.4 billion bushels, reflecting a continuation of a very slow growth rate. Corn exports will likely decline from the 2.2 billion bushels expected this year due to large competing supplies in South America . We project a 9 percent decline, to a total of 2 billion bushels. Feed and residual use of corn will also likely decline from the level of the current year as byproduct feed from the ethanol industry provides more competition. Byproduct feed from a 1.25 billion bushel increase in corn used for ethanol production would substitute for about 150 million bushels of corn feeding if 75 percent of the byproduct is used in the domestic market. Allowing for some modest increase in livestock numbers, a 100 million bushel decline in corn feeding is forecast, to a total of 5.75 billion bushels. Total use might be near 12.55 billion bushels, 975 million more than expected use for the current year, leaving year ending stocks at only 692 million bushels, or 5.5 percent of expected use. Under that scenario, the 2007-08 marketing year average price of corn might be near $3.30. The WAOB May 11 forecasts were for consumption of 12.465 billion bushels, year-ending stocks of 947 million bushels, and a marketing year average price in a range of $3.10 to $3.70. At the close of trade on May 17, 2007 the futures market reflected an average farm price for the year ahead near $3.70.
A crop 10 percent larger than expected would likely result in lower prices, increased consumption, and larger carryover stocks. We project larger use in each category except non-ethanol processing uses (Other) of corn. A crop of 13.519 billion bushels could result in total consumption of 12.9 billion bushels, year ending stocks of 1.566 billion (12.1 percent of projected use) and a 2007-08 marketing year average price near $2.60.
A crop 10 percent smaller than expected, at 11.061 billion bushels, would force consumption of corn for all purposes to be slightly less than during the current marketing year and one billion bushels less than projected with production at the expected level. For this and the following analysis, we assume that the year-ending stocks-to-use ratio cannot be reduced below 4 percent. This assumption follows from the idea that the minimum carryover is the amount needed to keep the corn marketing “pipeline” full. It is not known with certainty how large that need is, but in the most recent year of serious rationing of use (1995-96), stocks were reduced to 5 percent of consumption. Assuming that year-ending stocks cannot be reduced below 4 percent of consumption, use would be limited to 11.55 billion bushels and year ending stocks reduced to 463 million bushels. Prices would have to be high enough to ration use of the crop. Use of corn by category would be determined by the price elasticity of demand in each category. It is likely that the demand for ethanol, as well as other processing uses of corn, is relatively price inelastic and that the demand for corn as livestock feed is relatively price elastic. That is, as prices increase, consumption of corn for processing uses would likely decline by a smaller percentage than feed use of corn. Profit margins would be reduced or eliminated in the feed sector at lower corn prices than in the processing sector. The magnitude of the price elasticity of export demand is probably between the value for the other two categories, but closer to the elasticity of feed demand than processing demand since most corn is exported for livestock feed. Use of 11.55 billion bushels would be about 8 percent less than use under the scenario with expected production. The estimates by category in the balance sheet reflect the following percentage reductions:
Feed-------down 11.5 percent
Exports----down 10 percent
Ethanol----down 3 percent
Other-------down 3 percent
While these projections by category reflect the general pattern expected, actual use by category could deviate substantially from these projections. The important point is that total consumption would be restricted to a total of only about 11.55 billion bushels.
Corn prices would have to go to levels high enough to restrict consumption to the level of available supplies. A period of very high prices, probably exceeding the high experienced in the spring of 1996, would likely occur in order to accomplish the necessary rationing and the average farm price would likely exceed $4.00. There are no historical observations on which to base the average price forecast, but an average near $4.25 is projected.
A crop 20 percent smaller than expected would magnify the need for rationing outlined under the previous scenario. A crop of 9.832 billion bushels and year ending stocks of 414 million (4 percent of use) would allow consumption of only 10.37 billion bushels, 17.4 percent (2.18 billion bushels) less than consumption with a crop of 12.29 billion bushels. Compared to the scenario of expected production, use by category is forecast to decline as follows:
Feed------down 22.6 percent
Exports—down 20 percent
Ethanol---down 10 percent
Other -----down 10 percent
As in the previous scenario, consumption by category could deviate substantially from these projections, but total consumption would be limited by available supplies. A period of extremely high prices would be required in order to force such a large reduction in use. To reduce corn use for ethanol production, for example, corn prices would have to be high enough so that the most inefficient plants were unable to recoup variable costs of ethanol production. With ethanol prices near $2.20 per gallon, that price could be near $6.00. The average farm price for the year would likely exceed $5.00 per bushel and is forecast at $5.25. The high prices would force a substantial reduction in livestock numbers, increasing meat supplies in the short run, but resulting in much smaller supplies after that. Meat production could eventually decline 10 to 15 percent, resulting in escalating retail meat prices. The high prices would have significant negative financial implications for livestock producers, forcing some to discontinue production entirely.
IMPLICATIONS FOR MARKET PARTICIPANTS AND POLICY MAKERS
The historical distribution of the difference between actual U.S. corn production and production expected in the spring of the year suggests that there is an 80 percent probability that the 2007 crop will be between 10 percent smaller than expected (11.061 billion bushels) and 16.7 percent larger than expected (14.466 billion bushels). Production in this range would likely have few, if any, policy implications. While a crop smaller than the expected crop of 12.29 billion bushels would require use to be less than projected, a production shortfall of 10 percent or less would likely be managed by price signals, requiring no policy intervention. Market participants would have to manage higher corn prices. Larger shortfalls in production, however, might be more problematic due to: 1) the very small level of old crop stocks that will be on hand at the beginning of the 2007-08 marketing year, and 2) the very robust demand for corn expected from the ethanol sector. The historical pattern of the difference between actual and expected production suggests that the odds of a shortfall of 10 percent or more is not trivial. Shortfalls exceeding 10 percent occurred, on average, about once in five years since 1970. Shortfalls exceeding 20 percent of expected production would require significant rationing and very high prices, with potentially very negative implications for some users of corn. Shortfalls of that magnitude have occurred, on average, about once in 12 years since 1970.
An important public policy question, then, is, with an extreme shortfall in production, would the market be allowed to allocate the crop among users or would such a shortfall in corn production induce government intervention? The norm from past experience with rationing has been to allow the market to allocate the crop, with the largest adjustments taking place in the livestock sector. However, there has been one exception. Short supplies and high soybean prices in 1973 resulted in an embargo on U.S. exports. Such an embargo on corn exports might be considered following a large shortfall in production, but the potential negative impact on longer-term trade relationships would make an embargo a very unpopular alternative. The financial implications of high corn prices for livestock producers might evoke intervention in the allocation of supplies between domestic livestock producers and processors of corn.
At this stage of the 2007 growing season, there is certainly no indication of a substantial shortfall in U.S. corn production, nor are we predicting such an outcome. Discussion of market and policy implications of such a shortfall, then, may appear to be premature, unrealistic, or even alarmist. It is important to recognize, however, that the worst-case scenarios for corn production in 2007 (shortfalls exceeding 20 percent) were not analyzed. History indicates that shortfalls in production as large as 30 or 40 percent, though unlikely, are possible. The focus of the analysis here is not to forecast crop size, but to draw attention to the implications of crop size. Market participants and policy makers should be particularly aware of the consequences of a large shortfall in 2007 corn production. Market participants can develop plans to manage a shortfall in production and policy makers can consider appropriate responses to a significant shortfall. Developing policy responses in advance of the problem would allow input from market participants, provide for fair and reasoned policies, and allow for smoother implementation of the policies if needed. Even if a shortfall is avoided in 2007, the risk will continue for at least the next couple of years given the current low level of inventories, the current incentives for expansion of ethanol production, the lack of alternative feed stocks for ethanol production, and the need to continue to increase U.S corn acreage.
The current situation in the corn market may have other policy implications. Corn prices are expected to remain generally high and extremely volatile for an extended period of time. The combination of a low level of stocks and an increasing portion of corn consumption occurring in the ethanol sector, where demand is relatively price insensitive, suggests that prices will be extremely responsive to small changes in U.S. and world production prospects or changes in demand for corn in any other sector. Prices of other commodities will also be influenced as the market attempts to allocate production resources, primarily land, among the various crops. Provisions of the new “farm bill” are expected to reflect this changing environment of high and volatile crop prices. In addition, careful consideration of potential market impact should be given to policies encouraging additional bio-fuels production. Other considerations might include provision for a corn reserve in years of large production to provide a buffer for a future shortfall in production
05.11.07 - USDA CROP FORECASTS FOR 2007-08: The USDA’s monthly report of U.S. and world supply and consumption prospects released on May 11 contained the first forecasts for the 2007-08 marketing year for most crops. The market interpreted the forecasts as supportive for corn, soybeans, and wheat price prospects.
For the 2007 corn crop, the USDA projected the U.S. average yield potential at 150.3 bushels based on “an econometric model fit over 1990-2006 using a trend variable, July rainfall and temperature, and planting progress as of mid May”. The methodology differs from that of last year that based the yield calculation on a “linear trend fit over 1960-2005 (1988 omitted), adjusted for 2006 planting progress”. The projection this year is about two bushels less than expected by the market, but is about 1.5 bushels above a projection based on the simple linear trend from 1960 through 2006. It is likely that the trend yield for 2007 is overstated using the USDA methodology based on a relative short history. Growing conditions have been unusually good, on average, for the past 11 years so that a trend calculation for 2007 based on a longer history is probably more accurate. Regardless of the trend calculation, however, July and August weather will dominate yield prospects for 2007. Based on March planting intentions, a forecast of acreage harvested for grain, and the trend yield calculation, the 2007 crop is projected at 12.46 billion bushels, 1.93 billion larger than the 2006 crop. That is about 170 million bushels above our forecast of most likely production.
On the consumption side, the projection of exports during the current marketing year was reduced by 50 million bushels, while the forecast of processing use of corn was reduced by 10 million bushels. As a result, the projection of year ending stocks was increased by 60 million bushels, to a total of 937 million. For the 2007-08 marketing year, the USDA projects a 150 million bushel (2.6 percent) decline in feed and residual use of corn, a 225 million bushel (10.2 percent) decline in exports, and a 1.265 billion bushel (35.9 percent increase in processing use of corn. Most of the increase in processing use Is from a 1.25 billion bushels (58.1 percent) increase in the projection of corn used for ethanol production. Consumption of corn for all purposes during the year ahead is projected at 12.465 billion bushels, 890 million (7.7 percent) more than expected to be used this year. Year ending stocks are projected at 947 million bushels, or 7.6 percent of expected consumption.
For the 2007 soybean crop, the USDA projected the U.S. average yield potential at 41.5 bushels “based on 1989-2006 regional trend analysis”. Last year, the regional trend analysis was for the period 1978-2005. Based on March planting intentions, the 5-year average planted to harvested acreage ratios by state, and the trend yield calculation, the 2007 crop is projected at 2.745 billion bushels, 443 million smaller than the record large 2006 crop. Exports during the year ahead are forecast at 1.08 billion, the same as expected for the current year. The domestic crush is forecast at 1.79 billion bushels, 20 million more than he forecast for the current year which was increased by 5 million bushels in the May export. A modest (1.8 percent) increase in domestic meal consumption and a large (5.6 percent) increase in domestic soybean oil consumption is expected. Meal and oil exports during the year ahead are expected to be near the level of this year’s exports. Year-ending stocks of soybeans for the 2007-08 marketing year are projected at 320 million bushels, 290 million less than the projection for the current year.
The USDA’s first forecast of the size of the 2007 U.S. winter wheat crop came in at 1.616 billion bushels, 317.5 million larger than the 2006 crop. The hard red winter crop is forecast at 1.028 billion bushels, 346 million larger than the 2006 harvest, while soft red winter wheat production is forecast at 347 million bushels, 43.5 million smaller than the 2006 harvest. An official forecast of the size of the spring wheat crops was not made, but the USDA’s World Agricultural Outlook Board calculated production potential at 558 million bushels, compared to 514 million bushels in 2006. Production of all classes of wheat is projected at 2.174 billion bushels, 362 million larger than the 2006 harvest.
The forecast of marketing year wheat exports was increased by 10 million bushels for the current year, to a total of 910 million. Exports are projected at 975 million bushels for the 2007-08 marketing year. In addition, feed and residual use of wheat is projected to increase from 170 million bushels this year to 230 million in the upcoming year (starting June 1, 2007) due to high corn prices. Even with a large increase in production, stocks of U.S. wheat at the end of the 2007-08 marketing year are expected to remain relatively small at 469 million bushels, only 57 million larger than stocks at the end of the current year.
The USDA forecasts the 2007-08 marketing year average farm prices in a range of $4.35 to $4.95 for wheat, $3.10 to $3.70 for corn, and $ 6.50 to $7.50 for soybeans. At the close of trade on May 11, futures markets reflected average farm prices for the upcoming year at or above the high end of these ranges. Futures reflected 2007-08 average farm prices near $3.75 for corn and $7.90 for soybeans.
Issued by Darrel Good
Extension Economist
University of Illinois
05.10.07 -New ag direction offered by Lugar and House colleagues - U.S. Sen. Dick Lugar unveiled the Food and Agriculture Risk Management for the 21st Century Act (FARM 21) that would end the current market and trade distorting farm subsidy system and replace it with a new system of risk management accounts and insurance tools managed by farmers.
U.S. Reps. Ron Kind (D-WI), Jeff Flake (R-AZ), Joseph Crowley (D-NY) and Dave Riechert (R-WA) joined Lugar at a U.S. Capitol press conference today. Senate and House bills will be introduced in the next couple days.
“Current Federal Farm Programs target payments to a relatively narrow sector of American farmers and provide direct payments regardless of commodity prices. The bulk of these payments are made to growers of just five crops. Cotton, rice, corn, wheat, and soybean farmers receive about 85 percent of the annual payments provided by U.S. taxpayers,” said Lugar, an Indiana farmer and former chairman of the Senate Agriculture, Nutrition and Forestry Committee.
“The current farm subsidy system is inequitable, inefficient, and disconnected from the core goal of maintaining a family farm safety net. It is also self-perpetuating, in that it stimulates over-production and stagnant prices that produce calls for greater government support.
“We need a true safety net that would embrace all farmers, avoid incentives to overproduce commodities when market signals do not exist, and lower costs for taxpayers,” Lugar said.
“The reforms proposed today would make our farm and food policies as modern and entrepreneurial as our farmers, and at the same time, provide additional resources to America’s hunger, energy, and environmental needs. These changes will also bring our farm policies into compliance with our existing global treaty obligations and jump start current multilateral trade negotiations.”
The plan would save $20 billion by 2012 and $55 billion by 2018. The savings over the next five years would be invested in: $5 billion for debt relief, $6 billion for conservation, $6 billion for nutrition programs, and $3 billion for renewable energy.
Lugar also met today with Executive Director of the World Food Program Josette Sheeran, actress Drew Barrymore and the world’s fastest marathon runner, Paul Tergat, to discuss the George McGovern-Robert Dole International Food for Education and Child Nutrition Program (See photo link at www.lugar.senate.gov/farmbill).
Lugar’s new farm bill would increase the McGovern-Dole program by $1.1 billion over five years. The McGovern-Dole program provides food assistance in secular schools in developing nations. The program has shown success in improving attendance of children, especially girls. Participant countries are required to have in place a sustainability plan, meaning they will eventually take over the administrative and funding responsibility for the school meals program.
04.17.07 - USDA National Weather Summary, Highlights: Cold April weather continued in the wake of record-setting March warmth. The week opened in the midst of a severe, late-season freeze; Sunday was the coldest April morning on record in several Southeastern cities and towns. In the days following the April 7-8 freezes, producers from the central and southern Plains into the lower Midwest and Southeast monitored the effects of cold weather on numerous crops, including jointing to heading winter wheat, emerged corn, and blooming fruit trees.
Chilly conditions lingered for several days after the significant freezes, holding weekly temperatures 10 to 15 degrees F below normal in a broad area stretching from the central and southern Plains into the Midwestern and Mid-Atlantic States. The second week of April also featured increasingly stormy weather. Two major weather systems arrived along the West Coast, where frequent showers fell in the Pacific Northwest. Precipitation also fell in parts of the northern and central Rockies, but mostly dry weather and a warming trend prevailed elsewhere in the West. Meanwhile, a pair of strong storms maintained wintry conditions across the Plains and Midwest. The first system blanketed the northern Plains and northern Corn Belt with snow from April 10-12, while the second system delivered heavy snow to parts of the central and southern High Plains on April 13-14. Both systems produced significant rain across the southern and eastern Corn Belt, further delaying spring planting preparations and initial seeding efforts. Widespread showers also fell across the South, easing irrigation demands and providing some relief to drought-stressed crops and pastures.
However, strong thunderstorms peppered the South, especially from April 13-15, causing local wind and hail damage. At week's end, the second storm dramatically intensified along the Mid-Atlantic Coast, generating high winds, torrential rain, and high-elevation snow in the Northeast.
The week opened in the midst of a historic April cold snap, following the nation's second-warmest March on record. (The preliminary March average temperature for the Lower 48 States was
48.1 degrees F, or 5.6 degrees F above normal, second only to a value of 50.4 degrees F in 1910.) April 8 was the coldest April morning on record in several Southeastern locations, including Charlotte, NC (21 degrees F), Greenville-Spartanburg, SC
(24 degrees F), and Savannah, GA (28 degrees F). Charlotte's previous record of 24 degrees F had been set on April 1, 1923.
Jacksonville, FL (31 degrees F on April 8), posted its latest freeze on record, previously established on March 31, 1964. From April 5-9, Washington, DC, reported highs below 50 degrees F on
5 consecutive April days for the first time since 1898. Farther west, Muskegon, MI, tied its April record of 4 days in a row (April 5-8) with highs at or below 32 degrees F (previously, April 4-7, 1982). In Minnesota, Rochester's lows fell below 20 degrees F on 6 consecutive days (April 4-9), shattering its April record of 5 days set from April 2-6, 1920, and April 3-7, 1982. With an April 1-15 average temperature of 33.0 degrees F (8.4 degrees F below normal) Rochester also experienced its coldest first half of April since 1975. Meanwhile, Marquette, MI, noted consecutive sub-zero readings (-1 and
-3 degrees F) on April 9-10. Marquette's previous latest sub-zero temperature occurred on April 8, 1977, when the low was
-5 degrees F.
Heavy snow arrived on the northern Plains on April 10 and spread eastward. In the Dakotas, daily-record totals for April 10 included 5.5 inches in Bismarck, ND, and 4.5 inches in Aberdeen, SD. Sioux Falls, SD, measured 6.3 inches on April 10, marking its fourth-snowiest April day behind 10.5 inches on April 28, 1994; 10.0 inches on April 10, 1929; and 8.4 inches on April 4, 1957.
Farther east, Dubuque, IA (6.6 inches on April 11), experienced its snowiest April day since April 5, 1982, when 8.0 inches fell.
Consecutive daily-record totals were set in several Midwestern locations, including Rochester, MN (1.7 and 5.7 inches on April 10 and 11, respectively); Houghton Lake, MI (3.6 and 4.9 inches on April 11-12); and Rockford, IL (1.9 and 1.0 inches on April 11-12).
Farther east, heavy rain arrived in the Mid-Atlantic States, where record totals for April 12 included 1.37 inches in Atlantic City, NJ, and 1.59 inches at New York's LaGuardia Airport. A day later, heavy snow overspread northern New England, resulting in daily-record totals in Maine locations such as Caribou
(10.3 inches) and Millinocket (8.5 inches). April 12-13 snowfall totaled 5.3 inches in Bangor, ME, boosting its April-record total to 24.4 inches (previously, 16.5 inches in 1974).
Meanwhile, a second storm gathered strength over the nation's mid-section, trailed by cooler air. On April 12-13, Idaho Falls, ID, notched consecutive daily-record lows (20 and 17 degrees F).
Alamosa, CO (6 and 5 degrees F on April 13 and 14, respectively), also collected two record lows in a row. In contrast, warmth returned to the Southeast, where April 13 featured record-setting highs in Florida locations such as Ft. Myers (94 degrees F) and Tampa (90 degrees F). Farther west, heavy snow developed on the High Plains, where Dodge City, KS, received 10.0 inches on April 13-14. Most (9.8 inches) of the snow fell on April 13, which became Dodge City's second-snowiest April day behind 10.6 inches on April 7, 1938. Dodge City's previous record for snow on and after April 10 was 7.5 inches in 1900. Elsewhere in Kansas, Wichita noted a daily-record precipitation total (1.58 inches on April 13) and broke consecutive snowfall records (0.5 and 0.8 inch on April 13 and 14, respectively). By April 14, rain and wet snow returned to parts of the Midwest, where Ft. Wayne, IN (1.1 inches), posted a daily snowfall record). Meanwhile in Alabama, Huntsville's 1.26-inch rainfall on April 14 exceeded its 1.24-inch total during the preceding 43 days (March 2 - April 13). More details on the storm, which intensified on April 15 over the East, will be provided in next week's summary.
Mild, mostly dry weather covered the Alaskan mainland, where weekly temperatures averaged at least 10 degrees F above normal in several locations. Temperatures climbed to daily-record levels on April 9 in a few places, including Fairbanks (56 degrees F) and McGrath
(55 degrees F). It was Fairbanks' first reading above 55 degrees F since October 10, when the high was also 56 degrees F. Meanwhile, warm, mostly dry weather prevailed in Hawaii, although isolated heavier showers dotted the western islands. During the first half of April, rainfall totaled just 0.06 inch (4 percent of normal) in Lihue, Kauai, and 0.08 inch (8 percent) in Kahului, Maui.
Cooler than normal weather was widespread across the Nation during the week. Except in southern Florida, temperatures eastward from the Rocky Mountains averaged 5 to 15 degrees F below normal. West of the Rockies, average temperatures were generally normal to
5 degrees F below normal, except in the Desert Southwest where they were slightly above normal. Moderate to heavy preciptation fell in the Pacific Northwest, from the central Great Plains and the Delta eastward through the Ohio and Tennessee Valleys and much of the Southeast, and throughout the Atlantic Coast States. Much of the precipitation in the central High Plains and in the Northeast was in the form of late-season snow, with up to a foot recorded in western Kansas and up to 2 feet or more in New York and the New England States. The cold weather continued to limit evaporation from still-soggy fields in the Corn Belt, further delaying pre-planting fieldwork. In the South, growers continued to assess damage to fruits and developing field crops from the previous weekend's hard freeze.
Corn: Planting advanced 1 percentage point during the week to
4 percent complete by week's end, behind last year's 8 percent and the average pace of 9 percent. In the Corn Belt, where planting is normally underway except across the northern tier of States, farmers in Iowa, Illinois, and Indiana had not yet begun. Missouri and Kansas farmers had sown 18 and 5 percent of their intended corn acreage, respectively, well-behind last year and average. Texas and Kentucky farmers were about on schedule with 67 and 29 percent planted, respectively, while farmers in North Carolina and Tennessee were well-ahead of schedule with 55 and 54 percent planted, respectively.
Released March 30, 2007, by the National Agricultural Statistics
Service (NASS), Agricultural Statistics Board, U.S. Department of
Agriculture. For information on "Prospective Plantings" call
(202) 720-2127, office hours 7:30 a.m. to 4:00 p.m. ET.
Corn Planted Acreage Up 15 Percent from 2006
Soybean Acreage Down 11 Percent
All Wheat Acreage Up 5 Percent
All Cotton Acreage Down 20 Percent
Corn growers intend to plant 90.5 million acres of corn for all
purposes in 2007, up 15 percent from 2006 and 11 percent higher
than 2005. If realized this would be the highest acreage since
1944, when 95.5 million acres were planted for all purposes.
Expected acreage is up in nearly all States as high corn prices are
encouraging farmers to plant more acres to corn. The increase in
intended corn acres is partially offset by lower expected acres of
soybeans in the Corn Belt and Great Plains and fewer expected acres
of cotton and rice in the Delta and Southeast. Illinois farmers intend
to plant a record high 12.9 million acres of corn this spring, up
1.60 million acres from last year. North Dakota and Minnesota
growers also expect to plant record high corn acres, up 910,000 and
600,000 acres, respectively.
Soybean producers intend to plant 67.1 million acres in 2007, down
11 percent from last year. If realized, this will be the lowest
planted area since 1996. Acreage decreases are expected in all
growing areas, except in New York and the Southeast. Large
decreases in soybean acreage are expected across the Corn Belt,
with the largest decline expected in Illinois, down 1.40 million
acres from 2006. However, area planted to soybeans is expected to
increase in the Southeast, with Georgia expecting the largest
increase from last year at 95,000 acres. Planted acreage in New
York is expected to be the largest on record at 210,000 acres.
All wheat planted area is estimated at 60.3 million acres, up
5 percent from 2006. The 2007 winter wheat planted area, at
44.5 million acres, is 10 percent above last year and up 1 percent
from the previous estimate. Of this total, about 31.9 million
acres are Hard Red Winter, 8.66 million acres are Soft Red Winter,
and 3.92 million acres are White Winter. Area planted to other
spring wheat for 2007 is expected to total 13.8 million acres, down
7 percent from 2006. Of this total, about 13.3 million acres are
Hard Red Spring wheat. The intended Durum planted area for 2007 is
1.99 million acres, up 6 percent from the previous year.
All cotton plantings for 2007 are expected to total 12.1 million
acres, 20 percent below last year. Upland acreage is expected to
total 11.9 million, down 21 percent from last year and the lowest
since 1989. Growers intend to decrease planted area in all States
with the largest acreage declines in Arkansas, Georgia, Louisiana,
North Carolina, Mississippi, and Texas. American-Pima cotton
growers intend to decrease their plantings by 10 percent from 2006,
to 292,000 acres. California producers expect to plant
250,000 acres, down 9 percent from last year's record high.
This report was approved on March 30, 2007.
Secretary of
Agriculture
Mike Johanns
April 2007 -CORN: FOCUS TURNS TO U.S. WEATHER - The USDA's March 30 Grain Stocks and Prospective Plantings report pointed to more abundant supplies of U.S. corn. The March 1 inventory of U.S. corn was larger than expected, confirming a slow down in domestic feed and residual use and suggesting larger year-ending stocks. The pace of exports is also slowing, although domestic use of corn for ethanol production continues to expand. Producer intention to increase corn acreage by 15 percent in 2007 implies adequate corn supplies for the 2007-08 marketing year if the U.S. average yield is at or above trend value. Prices dropped sharply following the release of the reports, but prospects for some delays in corn planting and indications that winter wheat suffered some freeze damage resulted in a substantial recovery in prices by April 9. Prices are expected to remain "jumpy" well into the growing season. If planted acreage is near intentions and the U.S. average yield is near trend value, the 2007-08 marketing year average price would be expected to be near $3.40. Opportunities to price the crop well above that level are currently available and will likely persist until the market is confident of a large harvest.
Domestic Feed Use Slows
The USDA estimated that March 1, 2007 inventories of corn were at 6.07 billion bushels (Table 1). That estimate is 917 million bushels below the level of stocks a year ago, but about 75 million above the average pre-report guess. The stocks figure implies that 2.865 billion bushels of U.S. corn were used during the second quarter of the 2006-07 marketing year. Apparent use was 36 million larger than the previous record level of use last year. While domestic processing uses and exports were substantially larger than during the second quarter last year, feed and residual use was down 119 million bushels, or 7.3 percent. Feed and residual use during the first half of the year totaled 3.703 million bushels, 174 million (4.5 percent) less than use during the first half of the 2005-06 marketing year. Over the past 6 years, the seasonal pattern of feed and residual use of corn has been fairly consistent, except for 2004-05. In that year, feed and residual use during the first half of the year accounted for only 61.6 percent of the marketing year total. In the other 5 years, use during the first half ranged from 63.1 to 64.5 percent of the total, averaging 63.8 percent. If a "typical" pattern is followed this year, use to date points to a marketing year total of only 5.805 billion bushels. That would be 336 million (5.5 percent) less than use of a year ago and implies that use during the second half of the current marketing year would be 7.2 percent less than during the same period last year. Such a large decline does not appear likely given the current livestock inventory, particularly if winter wheat damage was significant and wheat prices remain high this summer. We are using a forecast of 5.85 billion bushels, compared to the USDA's forecast released before the March stocks estimate was available of 5.975 billion bushels.
If domestic processing use of corn is on pace to reach the USDA projection of 3.535 billion bushels for the year, use during the second quarter of the marketing year was likely near 820 million bushels, 15.8 percent more than used during the same quarter last year. Use during the first quarter of the current year was 13.6 percent larger than use of a year earlier, and the USDA's forecast for the year is 18.6 percent larger than use of a year ago. The USDA projection for the year implies a 21.9 percent year-over-year increase in processing use during the last half of the year. The accelerating rate of use is consistent with the growth in ethanol processing capacity.
Exports of U.S. corn during the second quarter of the marketing year were likely near 528 million bushels, 43 million larger than exports during that quarter last year and the largest for the quarter since 1995-96. Exports during the first half of the current marketing year totaled 1.12 billion bushels, 158 million (16.4 percent) larger than exports during the first half of the 2005-06 marketing year. The USDA's Export Sales report indicated that cumulative exports through March 29, 2007 totaled 1.286 billion bushels, only 14.6 percent more than cumulative shipments last year. Shipments during the last half of the 2005-06 marketing year were quite large, at 1.185 billion bushels. Shipments during the last half of the current marketing year will likely be smaller. Very small shipments were reported for the week ended April 5. The USDA's projection for the year is 2.25 billion, implying 1.13 billion to be shipped from March through August 2007. This is nearly 5 percent less than shipped during that period a year earlier. Outstanding export sales of U.S. corn on March 29, 2007 stood at 380 million bushels, compared to unshipped sales of 345 million last year. The current harvest of an extremely large corn crop in South America, along with continued high corn prices, suggests some softening in the pace of sales of U.S. corn. New sales for the week ended March 29 totaled only 21.6 million bushels. Weekly sales near 26.4 million are needed to reach the USDA projection. It is possible that exports will reach 2.25 billion for the year, but we have trimmed our forecast to 2.225 billion.
Based on the projections of use for the last half of the 2006-07 marketing year, stocks of U.S. corn on September 1, 2007 are forecast at 902 million bushels, or 7.8 percent of the projected marketing year consumption of 11.61 billion bushels. Historical relationships between the marketing year average farm price and the year-ending stocks-to-use ratio, stocks at 7.8 percent of use would point to a marketing year average price near $2.80. The midpoint of the USDA's early March forecast of the average farm price was $3.20. The average price received during the first 7 months of the 2006-07 marketing year was likely near $2.90. To reach an average of $3.20 for the year, the average for the 30 percent of the crop left to be sold during the last 5 months of the year would have to be near $3.90. Such a high average does not appear likely. Based on closing futures prices on the overnight session on April 9, 2007, the average farm price of corn during the last 5 months of the year was projected at 3.70, resulting in a marketing year average near $3.15. Corn prices are being supported above historic values by strong domestic demand, the need to plant substantially more acres of corn, and the uncertainty about production in an environment of smaller reserves.
Prospects for 2007-08
The USDA's March survey of producer planting intentions revealed plans to plant 90.454 million acres of corn in 2007. Those intentions are 12.127 million larger than planted acreage in 2006, 9.525 million above the recent high in 2004, and 5.866 million more than the modern high in 1976. In absolute terms, the largest increases in corn acreage are planned in Illinois (1.6 million), Iowa (1.3 million), North Dakota (910,000), and Nebraska (900,000). Percentage wise, the largest increases are planned in Arkansas, Georgia, Louisiana, and Mississippi. Producers in those four states plan to expand corn acreage by 1.6 million. Initial intentions for corn plantings reflect a modest reduction in the share of acres in the traditional corn planting areas and a marginal increase in areas outside of the corn belt.
The large planned increase in corn acreage along with 2.959 million more wheat acres will come primarily at the expense of soybeans (down 8.382 million) and cotton (down 3.127 million). In addition, reductions in acreage of rice (194,000) and sunflowers (151,000) are planned. Somewhat surprisingly, acreage intended for all crops included in the Prospective Plantings report, including harvested acreage of hay, is 5.5 million (1.8 percent) larger than actual plantings in 2006.
The immediate question is how many acres of corn will actually get planted in 2007. The price decline following the release of the intentions data along with a cold, wet start to April in the midwest ignited ideas that acreage could fall short of intentions. However, corn prices rebounded sharply following the initial decline and it is a little early to be overly concerned about planting delays in the midwest. Extended delays might result in fewer acres planted to corn, but extensive freeze damage to the winter wheat crop would likely result in additional acreage being planted to corn or sorghum. The most recent experiences with planting delays were in 1995 and 1996. In 1995, actual acreage planted to corn was 3.844 million (5 percent) less than March intentions while in 1996 actual plantings were only 691,000 (0.9 percent) less than March intentions. With current high corn prices, like those of 1996, producers will likely extend the planting window for corn if required by unfavorable weather. At this juncture, acreage near intentions should probably be expected.
The longer term questions center around summer weather conditions and average yield for the 2007 crop. The first issue is establishing a starting point for expected, or trend, yield for 2007. Since 1960, the U.S. average corn yield has been extremely variable, depending on growing season weather conditions, but has increased at an average of 1.85 bushels per acre per year. Since 1975, the trend increase in average U.S. corn yields has been very similar, at 1.9 bushels per year. Some have observed that yields have increased at a faster rate since 1996. The calculated trend for 1996 through 2006 is 2.6 bushels per acre per year. [calculations provided by Scott Irwin, Department of Agricultural and Consumer Economics, University of Illinois]. Using state average yield data for Illinois, Iowa, and Indiana and correcting for annual deviations from average temperature and precipitation during the growing season, however, reveals that the recent, more rapid rate of increase in trend yields in those states (and therefore most likely for the U.S.) results from more favorable weather over the past 11 years compared to the 21 years prior to 1996. The calculated U.S. trend yield for 2007 based on actual yields since 1975 is 149 bushels per acre. The expected yield under the assumption of average growing season weather would be higher, likely by several bushels. This is the case since trend yield calculations based on actual realized historical yields reflects the historical distribution of weather conditions. Historical weather conditions are not uniformly distributed so that extremely low yields have been more common than extremely high yields. As a result, trend yield based on the assumption of average weather is higher than trend yield based on the historical distribution of actual weather.
Another consideration for 2007 is whether or not the proportionately larger increase in corn acres in areas that traditionally have lower average yields influence the U.S. trend yield calculation for 2007. Analysis of the regional shift has indicated that the 2007 trend yield might be 0.5 bushels lower than if state shares of acreage remained the same as in 2006. A final consideration in forming an average yield expectation for 2007 is the increased amount of corn-on-corn acres in 2007 and whether there will be a "yield drag" on those acres. If, for example, half of the planned increase in corn acres is corn following corn, about 7 percent of the total corn plantings in 2007 would represent additional corn following corn acres. If those acres, on average, experienced a 5 percent lower yield, the overall impact would be a 0.35 percent (0.5 bushel) reduction in the U.S. trend yield. The potential yield drag might be offset by the fact that many of the additional corn-on-corn acres are in higher yielding areas of the country. Overall, the regional shift in acreage along with increased plantings of corn following corn might reduce the U.S. trend yield calculation for 2007 by a maximum of one bushel per acre.
A more important question for 2007, of course, is what will the growing season weather actually be? Statistically, July and August temperature and precipitation are the most important weather variables associated with actual yields. Some have pointed to the possible transition from El Nino to La Nina climate conditions that might point to an increased probability of adverse growing conditions in the midwest in 2007. Two things can be said at this point. First, the weak El Nino has given way to normal sea surface temperatures, not an La Nina at this time. The National Oceanic and Atmospheric Administration (NOAA) Indicates there is some chance that sea surface temperatures could continue to decline, creating a La Nina sometime over the next three months. Such a development does not appear imminent. Second, the correlation between the development of La Nina conditions and midwest summer weather is not strong. The conclusion at this point is that the 2007 average yield expectation should still be based on trend yield or on the assumption of average weather conditions.
If 90.454 million acres of corn are planted in 2007, area harvested for grain might be near 83 million acres with average growing season weather. A yield of 149 bushels, then, would produce a crop of 12.367 billion bushels. With beginning stocks of 902 million bushels and imports of 10 million bushels, the total supply of corn for the 2007-08 marketing year would be 13.279 billion bushels, 767 million larger than the supply for the current year. With adequate supplies and "reasonable" prices, consumption of U.S. corn will likely increase during the 2007-08 marketing year. The increase will be led by corn used for ethanol production. Those increases could push total domestic processing use of corn to 4.585 billion bushels. U.S. corn exports, however, are expected to decline modestly due to continued high prices and increased competition from South American corn and a rebound in world wheat production. Those exports are forecast at 2.1 billion bushels. Uncertainty about export demand for U.S. corn centers on China. A shortfall in production there along with escalating domestic consumption could add 100 to 200 million bushels to U.S. corn exports. Domestic feed use of corn may also continue to decline modestly if livestock feeding margins remain tight and feeding of by-product feed from ethanol processing continues to increase. An additional one billion bushels of corn used for eth
