Farm News, IA
07-04-07
Farmers answer corn demand
By Kristin Danley-Greiner, Farm News staff
A few surprises cropped up in the U.S. Department of Agriculture’s June
prospective plantings report released June 29.
The first surprise came with the increase in feed grain acreage and a bigger drop
in soybean, cotton and spring wheat acres than what had been expected.
The USDA estimates planted acreage of corn at 92.888 million acres, which is
2.434 million more than indicated in the March prospective plantings report and
14.561 million more than what was planted in 2006. Acreage exceeded intentions
by 300,000 to 400,000 acres in Illinois, Indiana, Iowa, Minnesota and Ohio. The
report also projected corn area harvested for grain in 2007 at 85.418 million
acres, 14.77 million more than harvested in 2006, said Darrel Good, agriculture
economist at the University of Illinois.
“If the U.S. average yield is near the USDA’s calculated trend value of 150
bushels, the 2007 harvested could total 12.8 billion bushels,”î he said. “A yield of
only 152.2 bushels would be required to produce a crop of 13 billion bushels. On
June 11, the USDA projected that corn consumption during the 2007-2008
marketing year would total 12.465 billion bushels. If the remainder of the 2007
growing season is favorable, the crop will be large enough to result in some
build-up in inventories during the year ahead.î”
According to the USDA report, planted acreage of soybeans is estimated at
64.081 million, 3.059 million less than indicated in March, 11.441 million less
than the record acreage of 2006 and the fewest acres since 1995.
“Compared to March intentions, acreage declines were widespread, led by
declines of 400,000 acres in Indiana, Iowa and Minnesota,î” Good said. “The
USDA projects harvested acreage at 63.285 million. If the 2007 U.S. average
yield is near the USDA’s calculated trend value of 41.5 bushels, the 2007 crop
would total 2.626 million bushels, 562 million less than he record crop of 2006.î”
Robert Wisner, agriculture economist at Iowa State University, said with
timely rains across the Corn Belt this summer, there is downside risk in
December corn to around the $3 per bushel area or even a little lower, with some
basis widening as the grain industry prepares to handle about 21 to 23 percent
more incoming U.S. corn than last year.
“The big pressure will be in states to the east of us and in the south, but in Iowa
corn volume at harvest may well be 13 to 16 percent larger than last year.
Pressure on storage facilities may be a problem although the bigger problem
may be receiving and drying capacity this year. Reduced old-crop stocks and a
smaller soybean crop will take some of the pressure off storage space,Ӕ he said.
“While the futures market responds to summer weather, local corn availability
has become tight in northwest Iowa, with the basis at a number of markets there
several cents over nearby futures. There does not appear to be a lot of hope for
the incredibly weak soybean basis—at least until after harvest.”î
Wisner also said the drop in corn prices that appears to be ahead will encourage
ethanol plant investors, some of whom have been holding back on breaking
ground, to start moving again. In fact, Wisner said that plants now under
construction appear to have the potential to boost 2008-2009 corn processing
capacity by at least another billion bushels beyond the 58 percent increase
expected in the year ahead.
“This year, farmers have boosted corn plantings by an incredible 15 million acres,
but that has come at a cost for users of other crops. U.S. soybean acreage is
down about 11 million acres and cotton plantings are down about 28 percent
from last year,”î he said. “More corn acreage next year will not be easy to pull out
of these crops, and current $6 wheat futures will keep corn from pulling acres out
of soft wheat in the eastern Corn Belt and along the eastern edge of the Great
Plains.
“Without more corn acres in 2008, it is likely the corn supply would get quite tight
in the 2008-2009 marketing year,”î he said. “That prospect should keep fund
traders from extreme bearishness in the months ahead.î”
Good said the large corn acreage and generally good crop conditions will keep
corn prices on the defensive, although weather spikes are likely.î
“Longer term, corn prices will likely recover, particularly in relation to soybean
prices, to ensure large acreage in the U.S. again in 2008,î” he said. “Lower than
expected corn prices, however, may lead to more consumption than previously
forecast. It is significant that the corn market has moved from worrying about
declining crop conditions to anticipating a surplus in a period of just two weeks.
“While U.S. soybean inventories will be reduced dramatically during the year
ahead, rationing of use will not be required if the average yield is near trend
value or higher,”î Good continued. “The most important segment of the U.S.
growing season is just beginning, so that periods of crop concerns will likely
occur, with the focus now turning to a drier western Corn Belt. The market will
likely continue to offer producers very favorable pricing opportunities for old and
new crop soybeans during the next several weeks.î”