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 and 2.6 pounds of Gluten Meal
and 1.5 pounds of Corn Oil
The corn crop condition report on Monday, July 27, 2009, was 2% very poor, 6% poor, 22% fair, 52% good (54% last week, 49% last year), and 18% (18% last week, 17% last year) of the corn crop was in excellent condition. So, 70% of the crop is currently in good to excellent condition, which compares to 66% last year.
Last week we reported that the current crop condition continues to be very bullish, especially for the central Corn Belt, where growing and development conditions are near perfect this week. However, this week, conditions are different. CME corn futures increased yesterday, moving up 6 cents to $3.222 per bushel, on growing speculation that the cool weather conditions, actually, the coldest July in nearly 50 years, may have slowed corn development in the United States, which would increase the risk for freeze damage later in the year. How strange is that? Normally, July would bring excessive heat, and perhaps low moisture.
However, temperatures in the Corn Belt have averaged 7f to 8f below normal for virtually all of July and late June. Low temperatures delay full maturity, which would in turn extend the crop later in the year which increases the risk for freeze damage. What ever happened to global warming?
CME corn September futures increased yesterday, moving up 6 cents to $3.222 per bushel, and the December contract moved up 6.5 cents $3.338 per bushel. Prices have decreased over 18% this year. Last Wednesday, the national corn cash price Index settled lower at $2.892 per bushel.
USDA World Agricultura;l Supply and Demand Estimates, June 10, 2009 COARSE GRAINS: U.S. feed grains supplies for 2009/10
are projected lower with reduced prospects for corn yields
and production. Corn production for 2009/10 is projected at
11.9 billion bushels, down 155 million from last months
projection. The national average yield is projected at 153.4
bushels per acre, 2 bushels lower as continued planting
delays through late May reduce yield prospects, especially for
the eastern Corn Belt. Early planting in the western Corn Belt
and improved crop conditions from last year at this time, as
reported in the June 8 Crop Progress, are expected to partly
offset the poor start to this yearÂ’s crop in other parts of the
country. Corn supplies are projected at 13.6 million bushels,
down 190 million bushels from 2008/09...more
The USDA will release two reports on March 31 that could have important implications for corn and soybean prices. These are the March 1 Grain Stocks report and the Prospective Plantings report. The March 1 inventory estimate should be more important for corn than for soybeans, since the rate of soybean consumption is well known, except for seed and residual use. The March 1 stocks estimate for soybeans, then, should be well anticipated. Any large deviation from the expected level would point to an error in the estimated size of the 2008 crop. For corn, the March 1 stocks estimate will reveal the rate of domestic consumption during the second quarter of the 2008-09 marketing year. Any large deviation from the expected level would mean that consumption occurred at a faster or slower rate than projected and/or the size of the 2008 crop was incorrectly estimated. The expected level of consumption during the quarter, however, is likely in a wide range.For soybeans, exports during the second quarter of the 2008-09 marketing year can be estimated from weekly USDA reports, although the official Census Bureau estimates are currently available only through December 2008. The January 2009 estimates should be released this week. Through December, cumulative Census Bureau export estimates exceeded, USDA estimates by 37 million bushels. Assuming that margin continued through February, second quarter exports would have totaled about 480 million bushels...more
Corn and soybean prices over the next several months will be influenced by several factors. Important among those factors will be the 2009 acreage decisions of U.S. producers and the strength of the biofuels markets. Expectations about planted acreage of corn and soybeans in the U.S. are in a wide range and actual planting decisions may remain uncertain for some time. Uncertainty centers around at least three factors. First, the prices of 2009 crop corn and soybeans continue to fluctuate, giving mixed signals to producers about the likely relative profitability of corn and soybeans in the 2009-10 marketing year. Second, there is considerable uncertainty about the relative cost of producing corn and soybeans in 2009. Fertilizer prices were very high in the fall of the year, but have recently declined, at least for some ingredients in some markets. The cost of producing corn in 2009 could vary substantially among producers. The distribution of producers who have paid high input prices and those who may pay lower prices could influence planted acreage, but that distribution is not known. Third, the sharp decline in winter wheat seedings and expected decline in cotton acreage in 2009 will result in additional acreage for other spring planted crops. The magnitude of that acreage is not known with certainty because some acreage could return to non-row crop production or be idled due to expectations of tighter margins for row crop production. In addition, the large decline in seedings of soft red winter wheat may result in fewer acres double cropped to soybeans...more
USDA National Weather Summary, January 25 - 31, 2009
Highlights: A major ice storm across parts of the Mid-South and the Ohio Valley disrupted travel and caused widespread power outages. Freezing rain accumulations in excess of 1 inch were reported in some areas from the Ozark Plateau into the middle Ohio Valley, and cold weather in the storm's wake hampered recovery efforts. In contrast, warm weather returned to the lower Southeast, including Florida, following the January 21-23 freezes. Farther west, cold but mostly dry weather prevailed across the Plains and the upper Midwest, although early-week snow in western Nebraska and environs helped to protect winter wheat from local temperatures below -20 degrees F. On the southern Plains, light precipitation provided only temporary relief to drought-stressed winter grains. Elsewhere, significant Western precipitation was confined to the central Rockies and parts of the Intermountain region...more
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
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
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
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
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
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
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
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
University of Illinois
May 2007 - 2007 U.S CORN PRODUCTION RISKS: WHAT DOES HISTORY TEACH US? Issued by Darrel Goodadn Scott Irwin,
University of Illinois
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.
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.
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
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.
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 ethanol production from corn would produce about 8.8 million tons of by-product feed. If 75 percent of that is fed domestically and 40 percent of that replaced corn in livestock rations, domestic feeding of corn would be reduced by 95 million bushels. We use a forecast of 5.8 billion bushels for feed and residual use of corn during the 2007-08 marketing year. Total consumption of U.S. corn during the 2007-08 marketing year could reach 12.485 billion bushels, leaving year ending stocks at only 794 million bushels, or 6.4 percent of consumption.
Based on relationships prior to 2006-07, the projected year-ending stocks-to-use ratio results in a projected 2007-08 marketing year average farm price of about $3.05. If prices remain above the level projected by historical stocks and price relationships, similar to the pattern of the current year, a price near $3.40 might be expected. At the close of overnight trade on April 9, 2007, futures settlement prices pointed to a 2007-08 marketing year average farm price near $3.95. The market appears to be trading a smaller crop than implied by planting intentions and a trend yield, a stronger demand scenario than forecast here, or a combination of the two.
New Crop Marketing
The current corn futures market is offering pricing opportunities that exceed the 2007-08 marketing year average price likely to result from a trend yield in 2007. However, December 2007 futures are slightly below the $4.06 price guarantee of crop revenue insurance products. To the extent that revenue guarantees are viewed as put options, aggressive pricing might be considered only at prices above the guarantee. A move above that level has a high probability, resulting from a continuation of spring weather concerns or an emergence of summer weather concerns. In addition, extended planting delays or other weather problems would likely push December 2007 futures above the current contract high of $4.30.
A conservative pricing strategy, particularly for those without a high level of coverage from a revenue insurance product, is to sell small quantities of new crop corn on a regular schedule through the spring and early summer months when production uncertainty is at a peak.
If a large corn crop does materialize in 2007, basis levels will likely remain weak through the harvest period in some areas. In total, U.S. corn supplies may be only marginally larger than the record supply in the fall of 2005, but supplies at that level will require a considerable amount of temporary storage. In areas with large increases in corn acreage, storage issues could be particularly severe.
Issued by Darrel Good
University of Illinois
03.30.07 - USDA has reported that corn stocks in all positions on March 1, 2007 totaled 6.07 billion
bushels, down 13 percent from March 1, 2006. Of the total stocks,
3.33 billion bushels are stored on farms, down 18 percent from a
year earlier. Off-farm stocks, at 2.74 billion bushels, are down
7 percent from a year ago. The December 2006 - February 2007
indicated disappearance is 2.86 billion bushels, compared with
2.83 billion bushels during the same period last year.
Soybeans stored in all positions on March 1, 2007 totaled
1.78 billion bushels, up 7 percent from a year ago and the largest
March 1 stocks on record. Soybean stocks stored on farms are
estimated at 910 million bushels, up 4 percent from a year ago.
Off-farm stocks, at 874 million bushels, are up 10 percent from
last March. Indicated disappearance for the
December 2006 - February 2007 quarter totaled 917 million bushels,
up 10 percent from the same period a year earlier.
All wheat stored in all positions on March 1, 2007 totaled
856 million bushels, down 12 percent from a year ago. On-farm
stocks are estimated at 192 million bushels, down 25 percent from
last March. Off-farm stocks, at 663 million bushels, are down
7 percent from a year ago. The December 2006 - February 2007
indicated disappearance is 459 million bushels, up slightly from
the same period a year earlier.
03.21.07 - With much of the market focus on corn and soybean planting intentions in the U.S., not much attention has been given to the U.S. and world wheat situation. In the big picture, the question is whether the short crop, tight wheat supply situation of the current marketing year will give way to a more abundant U.S. and world supply scenario.
In January, the USDA reported that U.S. producers seeded 44.089 million acres of winter wheat for harvest in 2007. That estimate is 3.514 million above the area seeded for harvest in 2006. Area seeded to soft red winter wheat was estimated at 8.33 million acres, about 13 percent more than seeded a year earlier. The increase was stimulated by relatively high wheat prices, even though supplies of soft red winter wheat remained abundant, and generally favorable seeding conditions. The exceptions to favorable seeding conditions were in Indiana, Kentucky, and Ohio where wet weather delayed the fall harvest and prevented wheat seeding. The largest increases in soft red winter wheat acreage were in the Delta states and southeastern states.
Area seeded to hard red winter wheat for harvest in 2007 was estimated at 31.9 million acres, up 9 percent from area seeded the previous year. Increases were registered in all major producing states as high prices encouraged seedings even in areas of moisture deficits. Acreage increases were especially large in the Dakotas, following declines the previous year.
There has been some speculation that winter wheat producers might choose to replant some acreage to spring planted row crops, particularly corn, due to high prices of these other commodities. However, wheat prices remain relatively high and the wheat crop is thought to be in generally good condition. Current weather patterns maintain the potential for relatively high wheat yields, making replacement with spring planted crops a very risky decision.
The USDA’s March 30 Prospective Plantings report will reveal producers intentions for seeding spring wheat. Spring wheat, including durum, is seeded primarily in the Dakotas, Montana, and Minnesota; with lesser amounts in Idaho and Washington. The general expectation is that producers will reveal intentions to reduce seedings of spring wheat in favor of corn and perhaps oilseeds. The decline is anticipated even though spring wheat prices remain relatively high because of the increase in winter wheat seedings and the high prices of other crops.
The 2006-07 world wheat crop is estimated at 21.79 billion bushels, 4.4 percent smaller than the crop of 2005-06 and 5.6 percent smaller than the record harvest of 2004-05. Large year-over-year production declines were registered in the U.S., Russia, Ukraine, Europe, and Australia. The largest decline occurred in Australia, where the crop totaled 386 million bushels, only 42 percent of the size of the previous harvest. As a result of the small world harvest, world consumption, trade, and ending stocks have declined significantly this year. The USDA projects the 2006-07 U.S. average farm price for all classes of wheat at $4.25 per bushel, the third highest behind the $4.55 of 1995-96 and $4.30 of 1996-97.
History suggests that periods of reduced supply and high prices are followed by a fairly significant world production response. The high prices of 1974-75, 1980-81, 1988-89, and 1995-96 were followed by relatively large increases in world wheat acreage. Acreage tended to stay large in the second year following high prices and then declined as world supplies became more abundant. It should be expected, then, that world wheat acreage will increase this year, but production will be dependent on weather and average yields. Much of the focus will be on Australia to see if precipitation returns to more normal levels following the recent drought conditions.
Wheat prices have been quite volatile over the past year as the short crops unfolded. July 2007 wheat futures at Chicago moved above $4.00 in February 2006 and broke above $5.00 in November 2006. That contract reached a high near $5.18 in late February 2007, but is currently trading near $4.70. Price volatility will likely continue due to the uncertainty about U.S. and world production of wheat and other crops. However, the longer term price trend may be lower as current high prices will likely lead to large crops and more abundant world stocks. If so, pricing opportunities may be best early in the 2007-08 marketing year.
Issued by Darrel Good
University of Illinois
03.09.07 - Sugar
Higher global production keeps dropping prices
Brazilian sugar prices have been moving down for more than one month, even with the off-season period. Between January 16 and last Wednesday, 28, the CEPEA/ESALQ Index for crystal sugar (Sao Paulo state) decreased 6.8 percent in real and 5.8 percent in dollar, from 37.13 to 34.61 reals or from 17.34 until 16.32 dollars per bag of 50 kilos.
Even with Brazil in off-season period, the pressure comes from the international prices that reflect estimative of higher global sugar surplus in the 2006/07 crop. Moreover, there are forecasts for enlargement in the next crops in several countries. The decreases are being limited by the firm sugar and ethanol demands.
The International Sugar Organization (ISO) shows a global surplus of 7.2 million tons in the 2006/07 crop, 24 percent higher than the previous forecast. The estimative of production increased from 158.3 million tons to 160.2 million tons, overtaking the 2005/06 crop (152.7 million tons). The global consumption should rise from 150 million tons (2005/06) to 153 million during the current crop. - SOURCE CEPEA
02.04.07 - Corn prices remain well supported in the face of the strong likelihood of expanded biofuels mandates and the need for a large increase in U.S. corn acreage in 2007. Soybean prices are receiving some support from the high rate of consumption and the expectation of reduced U.S. acreage in 2007.
The President’s call for the production of 35 billion gallons of alternative liquid fuels production by 2017 is likely to be actively pursued by Congress, insuring strong demand for corn based ethanol production. Current mandates call for 7.5 billion gallons of renewable fuels production by 2012. The Renewable Fuels Association (RFA) update of January 25 indicated that 111 ethanol plants are currently in operation with capacity to produce 5.44 billion gallons. RFA also reported that capacity is being expanded at 7 of those facilities and another 78 facilities are under construction, representing additional capacity of 6.22 billion gallons. Total capacity of nearly 11.7 billion gallons suggests that about 4.25 billion bushels of corn could be used for ethanol production as early as the 2008-09 marketing year. That is double the USDA’s projection of use for the current marketing year.
The pace of U.S. corn exports and export sales also remains brisk. The USDA reports that 856 million bushels of U.S. corn were exported during the first 20 weeks of the 2006-07 marketing year, 17 percent more than during the first 20 weeks of the 2005-06 marketing year. Unshipped sales as of January 18 were reported at 480 million bushels, compared to outstanding sales of 292 million bushels a year earlier. For the year, USDA expects exports to be only 103 million bushels more than exported last year.
There may be some additional slowing of domestic feed use of corn as a result of higher prices. USDA estimates indicate that feed and residual use of corn during the first quarter of the 2006-07 marketing year was 3 percent less than the record level of use in the previous year. The latest weekly USDA reports show some slow down in the number of broiler eggs set (3 percent) and broiler chick placements (1 percent).The January Cattle on Feed report showed placements into feedlots during December 2006 were 9 percent less than in December 2005.
The pace of soybean consumption is well above that of last year. The Census Bureau estimates that the domestic crush of soybeans from September through December 2006 totaled 615.4 million bushels, 24.7 million bushels, or 4.2 percent larger than the crush in the same four months last year. The year-over-year increase in December was 5.3 percent. Consumption of soybean meal, domestic and export, during the first quarter of the 2006-07 marketing year was estimated at 11.05 million tons, 4.1 percent more than consumed a year earlier. The pace exceeds the USDA’s 3.3 percent projected increase for the entire year. Soybean oil consumption in the first quarter of the year totaled 5.273 billion pounds, 10.4 percent more than consumed last year. For the year, the USDA projects a 7.5 percent increase. Even with some slow down in livestock production, the soybean crush for the entire year may exceed the current USDA projection of 1.78 billion bushels.
Exports of U.S. soybeans during the first 20 weeks of the 2006-07 marketing year were estimated at 564 million bushels, 21 percent more than exported in the first 20 weeks of the 2005-06 marketing year. As of January 18, the USDA estimated that 262 million bushels of soybeans had been sold for export, but not yet shipped. Unshipped sales a year earlier totaled only 166 million bushels. Shipments plus outstanding sales of 826 million bushels are nearly 30 percent larger than the total of a year ago. The USDA currently projects an 18 percent increase in exports for the year. Exports during the last half of the marketing year will be influenced by the size of the South American harvest. The USDA currently projects that crop at 3.89 billion bushels, 140 million larger than the record harvest of 2006. The largest year-over-year increase is expected in Argentina. Weather and crop conditions remain generally favorable in Brazil and Argentina.
The biggest factor looming in both the corn and soybean markets is the magnitude of planted acreage, and therefore production potential, in the U.S. in 2007. The USDA will survey farmers in March and release a Prospective Plantings report on March 30. A large increase in corn acreage is anticipated due to high prices and a favorable price ratio relative to soybeans. Much of that increase is expected to come from soybeans, but reduction in acreage of other crops is also anticipated. Downside risk in corn and soybean prices appears limited until more is known about the 2007 crop.
Issued by Darrel Good
University of Illinois
12.18.06 - FOCUS ON USDA REPORTS: Several USDA reports with implications for corn and soybean prices will be released over the next four weeks. Markets will obviously react to other developments, but these reports will provide important fundamental information that will be helpful for refining price expectations.
The monthly Cattle on Feed report to be released on December 22 and the quarterly Hogs and Pigs report to be released on December 27 will be important for assessing domestic feed demand for corn and soybean meal. The rate of placement of cattle into feedlots and the production intentions of hog producers will be of particular interest. Those estimates will reveal whether producers have responded to the sharply higher feed prices and lower livestock prices of the past two months.
Four reports will be released on January 12, 2007. These include the annual Crop Production report, the quarterly Grain Stocks report, the monthly World Agricultural Supply and Demand Estimates report, and the annual Winter Wheat Seedings report. The production report will contain the final estimates of the size of the 2006 corn and soybean crops. Historically (1970-2005), there has been a small positive relationship between the change in the production forecasts in November and the change in January. The smaller forecast for corn and larger forecast for soybeans in November this year suggests the market may be anticipating a smaller corn and larger soybean estimate again in January. The primary focus should be on the eastern corn belt, where wet conditions and delayed harvest may have negatively affected production. Because of strong demand and prospects for dwindling U.S. and world stocks, the production estimate for corn will be especially important.
The report of December 1 inventories of corn and soybeans will provide additional information about the rate of domestic use of those crops. Again, the report will likely be more important for corn as it will allow the calculation of the first quarter feed and residual use. The market is aware that corn exports have been large and that domestic processing use of corn is expanding rapidly, but this report will provide the first look at the largest component of use. For the 2006-07 marketing year, the USDA projects a 1.4 percent decline in domestic feed and residual use. The report will indicate whether livestock producers have started adjusting to tighter margins or whether that adjustment is yet to be made.
The monthly update of world supply and consumption projections will reflect new information in the Crop Production and Grain Stocks reports and will reflect any other important developments around the world. Following the larger corn production forecasts for South America and the larger soybean production forecast for Argentina this month, the market will be especially interested in the January projection for these crops. In addition, any changes in prospective Chinese corn exports or soybean imports would be important.
The estimate of winter wheat seedings will clearly be important for wheat price prospects, but may have strong implications for corn and soybean prices as well. It is expected that the report will show a large increase in seedings of hard red winter wheat due to the relatively high prices experienced during the fall seeding season. Expectations for soft red winter wheat are mixed. Anecdotal information suggested that producers in the eastern corn belt and southeast intended to increase acreage in response to high prices. The focus may be on Indiana, Ohio, and Kentucky to see if the wet fall weather had an impact on seedings. The magnitude and location of winter wheat seedings will have implications for spring-planted crops, particularly for the challenge to increase corn acreage by at least 10 percent in 2007.
Corn and soybean prices began their march higher in mid-September. The average cash price of corn in central Illinois reached a low of $2.09 on September 12 and a high of $3.67 on November 30. That price stood at $3.455 on December 15. For soybeans, the low of $5.045 was established on September 6 and the high of $6.60 was reached on November 30. That price was at $6.38 on December 15. The price for both crops appears to have moved into a more sideways to lower trend for now as little new fundamental information is flowing into the market place. That will change over the next few weeks as USDA reports are released and as the South American growing season progresses.
Issued by Darrel Good
University of Illinois
12.11.06 - PRODUCTION FORECASTS INCREASED FOR ARGENTINA - The USDA's December report of World Agricultural Supply and Demand Estimates contained only a few changes for the balance sheet for U.S. crops. However, forecasts of South American corn, soybean, and wheat production exceeded the November forecasts.
For the 2006-07 U.S. wheat marketing year, the USDA increased the forecast of domestic food use by 5 million bushels, reduced the forecast of exports by 25 million bushels, increased the forecast of year ending stocks by 20 million bushels, and reduced the midpoint of the forecast of the marketing year average price by $.05. At 900 million bushels, U.S. wheat exports are expected to be 109 million less than exported last year, at the lowest level since 2002-03, and at the second lowest level since 1971-72. As of December 7, 27 weeks into the marketing year, cumulative U.S. wheat export inspections totaled 441 million bushels, 102 million less than the total of a year ago. Unshipped export sales as of November 30 totaled 162 million bushels, compared to 184 million bushels on the same date last year. The year-over-year decline in exports is distributed among most major buyers, with only Egypt buying more U.S. wheat than at this time last ear. By class, the largest decline is for hard red winter wheat, while sales of soft red winter wheat are larger than those of a year ago.
For feed grains, the USDA made no changes in the 2006-07 marketing year projection of consumption of U.S. corn, but increased the midpoint of the projection of the marketing year average farm price by $.10, to $3.10. Similarly, no changes were made in sorghum consumption forecasts, but the average price forecast was also increased by $.10. The projection of barley exports was increased by 5 million bushels and no changes were made in the oats balance sheet.
For soybeans, the balance sheet projections were unchanged from November, but the midpoint of the projection of the marketing year average farm price was increased by $.20, to $6.10. For soybean oil, the estimate of stocks at the beginning of the 2006-07 marketing year (October 1, 2006) was increased by 48 million pounds, to 3.019 billion pounds. The forecast of soybean oil production was increased by 90 million pounds, to a total of 20.205 billion pounds, reflecting a slightly larger oil yield expectation. The projection of marketing year oil exports was increased by 100 million pounds and the projection of year-ending stocks was increased by 41 million pounds. The marketing year average price is projected in a range of $.26 to $.29 per pound, compared to the November projection of $.24 to $.28. The only changes in the soybean meal balance sheet were a 6,000 ton reduction in the estimate of stocks on October 1, 2006 and an equal increase in the projection of meal production for the current marketing year.
More significant changes were registered for production prospects outside of the United States, particularly for Argentina. The current Argentine wheat crop is now forecast at 522 million bushels, 35 million larger than the November forecast and 16 million larger than last year's crop. The projection of Argentine wheat exports was increased by 37 million bushels. The Argentine corn crop is forecast at 748 million bushels, 59 million larger than the November forecast and 126 million larger than the 2006 harvest. Finally, the 2007 Argentine soybean crop is forecast at 1.543 billion bushels, 26 million larger than the November forecast and 55 million larger than the 2006 crop.
Other significant changes included a 37 million bushels increase in the estimated size of the Canadian wheat crop and a 39 million bushel increase in the projected size of the 2007 Brazilian corn crop. The projections of world stocks were increased for wheat, coarse grains, and oilseeds.
The changes observed in the U.S. world production and consumption forecasts were generally expected, with no surprises observed. The changes in world production forecasts and the related changes in forecasts of year-ending stocks do not alter the fundamental picture significantly, but do reflect a marginally more abundant supply situation. The markets will continue to monitor the rate of U.S. exports and export sales and anticipate the January 12, 2007 reports of December 1, 2006 grain stocks, 2006 winter wheat seedings, and final 2006 U.S. production estimates. Following the sharp increase in prices since mid-September, some consolidation would not be surprising over the next 4 weeks. The major issue will continue to be U.S. producer planting intentions for 2007.
Issued by Darrel Good
University of Illinois
12.06.06 - CORN AND SOYBEAN EXPORTS OFF TO A STRONG START
The first quarter of the 2006-07 marketing year for corn and soybeans ended on November 30. The pace of U.S. exports and export sales was brisk during that quarter.
The magnitude of exports during the first quarter does not always provide an accurate forecast of exports for the year. Over the past five years, for example, first quarter corn exports accounted for 22.2 to 27.4 percent of the total for the year. Performance has been even more variable for soybeans, with first quarter shipments ranging from 30.7 to 43.5 percent of the marketing year total. The first quarter total, however, allows the calculation of export performance needed for the rest of the year to reach current projections for the year.
For corn, the USDA currently projects 2006-07 marketing year exports at an 11 year high of 2.2 billion bushels, 53 million more than exported last year. Census Bureau estimates of U.S. corn exports are currently available only for September. USDA export inspection estimates are available through November 30 and estimates from the USDA's Export Sales report are available through November 23. Cumulative export inspections through November 30 were estimated at 565 million bushels. For September, the Census Bureau estimate was about 2 million bushels less than the inspections estimate. For September and October, the estimate from the Export Sales report exceeded inspections by 6.6 million bushels (1.7 percent). That difference was only 2.2 million (0.4 percent) through November 23.
The Export Sales report provides a more complete accounting of exports than the inspections report. It appears, then, that first quarter corn exports may have totaled about 567 million bushels. That estimate exceeds shipments during the first quarter last year by 90 million bushels and represents the largest first quarter shipments in 11 years. The largest year-over-year increase in shipments is to Mexico, while the largest buyer of U.S. corn, Japan, has imported less U.S. corn than at this time last year.
To reach the USDA projection of corn exports for the year, shipments during the last three quarters need to total 1.633 billion bushels, 37 million less than exported during the same period last year. Exports during the final three quarters of the marketing year last year were the largest since 1994-95. As of November 23, the USDA reported that 468 million bushels of U.S. corn had been sold for export, but not yet shipped. That compares to only 305 million on the same date last year. All major importers have registered larger purchases than those of a year ago. New sales need to average only about 30 million bushels per week to reach the USDA projection for the year.
For soybeans, the USDA projects 2006-07 marketing year exports at a record 1.145 billion bushels, 198 million more than exported last year. The combination of Census Bureau and USDA estimates suggest that first quarter shipments were near 370 million bushels, about 57 million larger than the first quarter shipments of last year and the third largest ever for the quarter. All major buyers of U.S. soybeans imported more during the quarter than were imported in the same quarter last year. To reach the USDA projection for the year, U.S. soybean exports need to total 775 million bushels during the last three quarters of the year. Shipments during that period totaled only 635 million bushels last year. The previous record for that three quarter period was 725 million bushels in 2002-03. As of November 23, the USDA reported that 269 million bushels of U.S. soybeans had been sold for export, but not yet shipped. That compares to only 145 million of outstanding sales on the same date last year. China and "unknown"destinations accounted for all of the increase. Weekly sales now need to average only about 13 million bushels for exports to reach the USDA projection. The size of the 2007 South American crop will have some influence on U.S. exports during the last five months of the marketing year.
There is no evidence yet that the higher prices of U.S. corn and soybeans have slowed the pace of export commitments. Some of the large outstanding sales, however, may represent an accelerated pace of purchases as importers anticipated higher prices, or in the case of corn, reduced availability due to domestic ethanol use and a smaller than expected crop. Until there is some evidence of reduced interest in U.S. crops, prices will likely remain well supported. However, it may be difficult to support prices at the extremely high levels of late November through the winter months.
Issued by Darrel Good
University of Illinois
11.20.06 - CORN: CHANGING PRICE STRUCTURE ; As the rapid pace of construction of ethanol plants unfolded, it was generally believed that corn supplies would be adequate for the current marketing year. Concerns about supply shortages centered on the 2007-08 marketing year and beyond. Thoughts of current abundance and potential future shortages if production did not expand rapidly resulted in a large carry in the corn futures market. On September 13, 2006, for example, July 2007 futures prices were about $.31 above the price of the December 2006 contract. December 2007 futures were $.47 above December 2006; December 2008 futures were $.15 above December 2007; and December 2009 futures, at $3.10, were $.10 above December 2008. At the close of trade on November 17, 2006, July 2007 futures were only $.2075 above December 2006 futures; December 2007 futures were $.155 below 2006; December 2008 futures were $.1775 below December 2007; and December 2009 futures, at $3.19, were $.03 below December 2008. The spread from December 2006 futures to December 2009 futures went from $.72 on September 13 to $-.3625 on November 17, a decline of $1.0825. The change reflected sharply higher prices in nearby contracts and more modest increases in deferred contract. The changing structure of the corn market reflects a much tighter supply and consumption balance for the current year than anticipated in mid-September. September 1, 2006 inventories of old crop U.S. corn totaled only 1.971 billion bushels, 41 million less than forecast in mid-September. The 2006 harvest is now estimated at 10.745 billion bushels, 369 million below the September forecast. The supply of U.S. corn for the current marketing year is 410 million bushels less than that projected two months ago. In addition, foreign wheat production this year is now expected to be 350 million bushels less than projected in September. While the Chinese corn crop is now expected to be nearly 200 million bushels larger than forecast in September, larger Chinese exports are not expected. Harvest delays, increasing domestic consumption, and escalating domestic prices have led to speculation that some Chinese export sales may be re-purchased. Argentina also announced a suspension of export sales due a surprisingly high level of export sales already on the books. Export sales of U.S. corn continue at a rapid pace, led by sales to Japan. Unshipped sales of U.S. corn to Japan as of November 9 were reported at 164 million bushels, compared to only 85 million bushels on the same date last year. Mexico, Taiwan, and South Korea have also bought more U.S. corn than at this time a year ago. Columbia has purchased a substantial amount, 49 million bushels, of U.S. corn. Purchases by corn importers have likely been accelerated as concerns about available supplies increase.
While concerns about tight supplies for the current year have increased, there appears to be a little less concern about next year. It is expected that the high wheat prices will result in a substantial increase in world wheat production in the year ahead resulting in rebound in wheat feeding at the expense of corn. Domestically, higher corn prices will likely result in a slowing of feed consumption. In addition, higher corn prices, lower crude oil prices and some construction delays may slow the expansion in construction of new ethanol plants. An increase in U.S. corn acreage is also anticipated for the year ahead. The favorable price of corn in relation to soybeans is expected to spur most of the increase. Reports that seedings of soft red winter wheat fell short of intentions due to unfavorable weather suggests a little more acreage available for spring planted crops, including corn. Most agree, however, that a substantial increase in corn acreage is needed to keep corn prices at “reasonable” levels for users. There is little historical experience to guide expectations of how producers will respond. In general, corn price prospects remain very unsettled as domestic and world market conditions change. The price of corn, along with the price of other crops, will have to be high enough to encourage the planting of all available crop land area in the U.S. and perhaps to bring some land currently in the Conservation Reserve Program back into crop production as contracts expire. Corn prices will have to be high enough in relation to the price of other crops in order to direct a higher percentage of U.S. crop land into corn production.
All of these factors suggest that corn prices will remain high, although potentially volatile, through the winter months. The spring and summer of 2007 could bring more than the usual amount of price volatility as planting intentions are revealed and growing conditions unfold. Production problems and higher prices would spur the debate about the subsidies provided for biofuels.
Issued by Darrel Good
University of Illinois
11.13.06 - CORN BALANCE SHEET GETS TIGHTER ; The USDA’s November forecasts of the size of the 2006 U.S. corn and soybean crops were smaller than expected. For corn, the smaller crop and high prices are expected to reduce feed and residual use to a three year low and to limit the year-over-year increase in exports. The size of the 2006 U.S. corn crop is now forecast at 10.745 billion bushels, 160 million bushels below the October forecast and 369 million below the September forecast. The U.S. average yield is forecast at 151.3 bushels, 3.4 bushels below the September forecast. The largest reductions in yield and production forecasts came in Illinois, Indiana, and Iowa. The U.S. crop is expected to be 367 million bushes smaller than the 2005 crop and 1.062 billion smaller than the record crop of 2004. The USDA’s World Outlook Board reduced the 2006-07 marketing year forecast of domestic feed and residual use of corn by 50 million bushels. The forecast of 6.05 billion is 86 million below use of last year. The forecast of marketing year exports was also reduced by 50 million bushels. The forecast of 2.2 billion is 53 million bushels above exports of a year ago and would be the largest in 11 years. Chinese corn exports are projected at 157 million bushels, about 10 million more than exported last year. The Chinese corn crop is estimated at 5.59 billion bushels, about 105 million larger than the 2005 crop, but the increase is expected to be consumed domestically. As of November 9, the USDA reported cumulative U.S. corn exports for the current marketing year at 430 million bushels, 19 percent above the total of a year ago. Last year, exports started slowly and then accelerated beginning in January 2006. For the week ended November 2, the USDA reported new export sales of 76 million bushels, with total unshipped sales as of that date standing at 455 million bushels, compared to 288 million on the same date last year. At 885 million bushels, shipments plus outstanding sales account for 41 percent of the USDA’s export projection for the year. With the world wheat crop about 1.18 billion bushels (5.2 percent) smaller than the 2005 crop and world wheat consumption expected to drop by 300 million bushels (1.4 percent) the export demand for U.S. corn is expected to remain very strong over the next several months. The USDA’s December 1 Grain Stocks report, to be released on January 12, 2007, will provide the first measure of the rate of domestic feed and residual use of corn. Large numbers of livestock being fed suggest a high rate of feed and residual use during the first quarter of the marketing year. The USDA projects corn inventories at the end of the current marketing year at 935 million bushels, or 7.9 percent of projected consumption. Based on the relationship between stocks and price in the relatively strong demand period of 1989-90 through 1997-98, a stocks-to-use ratio of 7.9 percent would suggest a 2006-07 marketing year average farm price of about $2.77. The USDA projects an average price between $2.80 and $3.20. At the close of trade on November 10, 2006, the futures market implied an average farm price near $3.25. The relatively high futures prices likely reflect a number of factors. Fundamental strength likely stems from expectations that the January corn production estimate will be smaller than the November forecast, lack of evidence that corn consumption has slowed in line with USDA projections, and the need to encourage a large increase in U.S. corn acreage in 2007. The expectation of a smaller production estimate in January likely stems from the modest tendency for the direction of change in January to follow that of November. That relationship, however, is weaker than the relationship in November and October. In addition, changes in January historically have reflected the inclusion of administrative acreage data. That acreage data are now reflected in the October production forecast. In the case of the U.S. average yield forecast, there have been six years since 1975 in which the forecast declined in October and again in November. In those six years, the January estimate exceeded the November forecast twice and was smaller four times. The 2006 U.S. soybean crop is now forecast at a record 3.204 billion bushels, 15 million larger than the October forecast, 141 million larger than the 2005 crop, and 80 million larger than the previous record crop of 2004. The U.S. average yield is forecast at 43 bushels, equal to the record of last year. The projection of the domestic crush during the current marketing year was increased by 5 million bushels, to a total of 1.78 billion. Year ending stocks are projected at 565 million bushels, or 18.3 percent of projected consumption. Historical relationships between stocks and average farm price point to 2006-07 average farm price near $5.45 with a stocks-to-use ratio of 18.3 percent. The USDA projects the average in a range of $5.40 to $6.40 and closing futures prices on November 10, 2006 implied an average farm price near $6.25. The relatively high price of soybeans is most likely explained by the need for the soybean market to protect its 2007 acreage turf as corn prices move higher. In addition, soybean meal prices are supported by higher corn prices and soybean oil prices are being supported by expectations of rapidly expanding biodiesel production. A change in the trend of higher corn prices would not be expected until there is some evidence of a slow down in consumption. Soybean prices will likely continue to follow corn prices.
Issued by Darrel Good
University of Illinois
11.06.06 - CORN CONSUMPTION: WHO WILL BLINK? ; Consumption of U.S. corn during the current marketing year is projected by the USDA to reach 11.890 billion bushels, 624 million above the record consumption of last year. If the U.S. crop is significantly smaller than the current forecast of 10.905 billion bushels, however, consumption may have to be less than forecast. It is rare that the U.S. crop is small enough that total supply (production plus carryover stocks) is small enough to require a reduction in consumption from the level of consumption during the previous year. That scenario unfolded only four times in the past 30 years: 1983-84, 1993-94, 1995-96, and 2002-03. Consumption was lower than the previous year on five other occasions, but supplies were large enough in each of those years to accommodate an increase in consumption. For the current marketing year, supplies are not small enough to force a year-over-year reduction in consumption, but may be small enough that consumption will have to be less than currently projected.
The USDA will release a new forecast of the size of the crop on November 9 with the final production estimate to be released on January 12, 2007. Expectations are that the November U.S. average yield forecast will be 1.5 to 2.5 bushels below the October forecast of 153.5 bushes per acre, resulting in a production forecast of 10.73 to 10.8 billion bushels. With 45 percent of the crop rated in good condition and 18 percent rated in excellent condition at the end of the season, a yield near 152 bushels would be expected. With September 1, 2006 stocks of 1.971 billion bushels, a crop of 10.765 billion bushels, imports of 10 million bushels, and consumption of 11.89 billion, stocks at the end of the current marketing year would be reduced to 856 million bushels, or 7.2 percent of projected use. The experience of 1995-96 suggests that a minimum pipeline supply at the end of the year is about 5 percent of consumption, equivalent to about 600 million bushels this year. At this juncture, potential supplies appear adequate to allow consumption at the projected level, but concerns about the 2007-08 marketing year will persist.
Historically, the adjustment to shortfalls in U.S. corn production were primarily in the domestic feed and residual category of use. In the four years in the past 30 years that supplies were small enough to force a year-over-year reduction in use, feed and residual use declined by an average of 11.3 percent, in a range of 5.1 to 15.2 percent. The largest year-over-year decline in feed and residual use in recent history was 17.9 percent in 1988-89. Ironically, corn supplies were large enough that year that a reduction was not required. Prices over-reacted to the extremely small crop, forcing a larger than required reduction in use. The quarterly pattern of decline in feed and residual use was not consistent over the five years mentioned here, occurring early in 2003-03, late in 1983-84, and more uniformly in the other three years. In the four years of forced reduction in corn consumption, U.S. exports were larger than the previous year twice (1983-84 and 1995-96) and lower twice (1993-94 and 2002-03). Exports were influenced by the size of the world feed grain crop and the strength in demand in importing countries, not just the price of U.S. corn. There has been only one year in modern history with a year-over-year decline in domestic seed, food, and industrial use of corn. That was 1995-96, when use declined by 87 million bushels (5 percent). Most of the decline was in the fourth quarter, following historically high prices in the spring of 1996. The use of corn for fuel alcohol declined by 137 million bushels (25.7 percent) during the 1995-96 marketing year, while corn used for food and beverage products increased by 42 million bushels (3.5 percent).
In the current environment, the majority of the adjustment to a shortfall in U.S. corn production resulting in high prices, would likely occur in the domestic feed and residual category. The distribution of the adjustment over time and species of livestock would be influenced by the level of livestock prices, adjustment in livestock prices, and timing and magnitude of increase in corn prices. Likely response in the export market is less predictable and would depend on the availability of other feed grains worldwide and the strength of the world livestock markets. Domestic processing use of corn would likely be the least responsive to supply shortages and high prices. In particular, corn used for ethanol production would likely not decline as it did in 1995-96, if crude oil prices remain at or above current levels. The USDA’s December Grain Stocks report, to be released on January 12, 2007, will provide some information about how domestic livestock producers are responding to the high price of corn. Producer decisions about crop acreage in 2007 will be the first indication of whether or not a corn supply problem can be anticipated any time soon. A report of intended corn acreage will not be released until March 30, 2007, but the January 12, 2007 Winter Wheat Seedings report will provide some important information about supply response to higher prices.
Issued by Darrel Good
University of Illinois
Shifts in acres from soybeans to corn likely are needed to meet future corn demand for ethanol production. For acreage shifts to occur, corn prices must increase relative to soybean prices so that some farmers find corn production more profitable than soybean production. Since yields impact profitability and yields vary geographically, acreage adjustments are likely to be regional in nature. Potential for shifts are examined in this paper by computing break-even soybean-corn price ratios for counties in the greater corn-belt. These breakeven ratios are compared to projected soybean-corn ratios, as described in the following section. Overall, current futures prices suggest that many farmers over much of the corn-belt will likely find corn production more profitable than soybean production in 2007 and 2008.
10.23.06 - CATTLE INDUSTRY ADJUSTS TO HIGHER FEED COSTS: WHO ARE THE LOSERS?The era of cheap feed is probably over for years to come. Over the past eight crop years from 1998 to 2005, U.S. corn prices averaged just $2.05 per bushel. Historically, the cattle industry has been the animal segment that makes the biggest adjustments to high priced feed and that will likely be the case this time as well. The recent decline in calf prices represents a potential for $1.9 billion in lower annual returns for cow-calf operations. Excess capacity in feedlots will be costly as well. However, learning to feed distillers’ grains at much higher inclusion rates remains the opportunity.
In addition, there are lots of cattle in feedlots. The October 1, 2006 inventory is the largest since the current records began in 1996. Feedlot managers placed large numbers of calves this summer and early fall, and paid high prices for the privilege of ownership. Now, feed prices have moved much higher, raising costs of production and breakeven levels.
How will the cattle feeding industry respond to much higher feed prices? The latest USDA Cattle on Feed report gives just a few clues. Placements were down five percent indicating less willingness to put cattle in the feedlot with such an uncertain feed price situation. Younger cattle were the preference for placements in September with calves under 600 pounds up 28 percent, while placements of cattle over 600 pounds were down 16 percent.
In reality, however, the October Cattle on Feed report is still not current enough to reflect the direction of feedlots yet. It is for the month of September and much of the corn price increase came in October. For example, December corn futures traded in a range from about $2.37 per bushel to $2.50 per bushel from September 1 to September 20. Even by the end of September, December futures had reached only $2.625. For the majority of September, feedlot managers were still hoping for harvest lows. The more dramatic corn price action came in October, when December corn futures reached their high of $3.245 on October 17. The impact on the cattle industry can be seen more completely by looking at the impacts on cattle prices from mid-September to the current time period.
Over the last month, finished cattle prices have dipped about $2.00 per hundredweight. Most of that decline was due to forces other than the higher feed prices, however. Where the impact of higher feed prices is most pronounced is on feeder cattle and calf prices. November feeder cattle futures, as an example, dropped $10.87 per hundredweight from mid-September through October 20. Cash prices for 500-550 pound steer calves at Oklahoma City dropped by $10.59 per hundred. So, the initial surge of higher feed prices is being felt most heavily by two industry sectors. The first is feedlot managers who paid high prices for calves and did not have their needed feed input costs hedged. The second and biggest losers from much higher feed prices so far are the cow-calf operations and some backgrounders. The cow-calf segment is particularly hard hit as lower calf prices can be expected as long as feed prices stay high, or until distillers’ grain use can help moderate overall feeding costs.
How big is this impact? It can be large. As a simple example, assume that higher feed prices lowered calf-prices by $10 per hundredweight on each 500 pound calf for one year. This is $50 per head multiplied by the 37.9 million head national calf crop or $1.9 billion that moves from cow-calf producers to crop producers primarily as a result of the growth in ethanol production. It’s too early to understand all of the impacts and to make accurate projections, but the reality of higher feed prices has arrived, and the cattle industry must make major adjustments.
One of those adjustments is in utilizing the distillers’ grains in rations. Much has been learned already, but inclusion rates probably will have to move even higher. As feed prices move higher, market weights will likely drop. Generally in periods of higher feed prices the cattle feeding industry shifts to much higher placement weights. That is likely in coming months. Also, fewer cattle tend to go into feedlots, and on-feed numbers drop. This means there may be large excess capacity in feedlots for several years to come.
Finally, the risk associated with feed ingredient prices has increased. This means that not only will feed prices be higher and maybe much higher in coming years, but the volatility of feed ingredient prices will likely be much greater as well.
Issued by Chris Hurt
10.02.06 - CAN PORK PRODUCERS HANDLE $3.00 CORN? The pork industry's concerns about higher corn prices from the extraordinary growth in corn demand for ethanol appears to be moving from speculation to reality. Higher corn prices are expected to have at least two impacts in the coming year. First, market weights will likely drop, which is a positive for hog prices. However, this will be more than offset by the negative consequences of higher corn prices on costs.
In addition to escalating costs, there is also some expansion in the nation's herd, with the USDA reporting the market herd up over 1 percent and the breeding herd up nearly 2 percent on September 1, 2006 . This means pork production will rise by about 2 percent over the next 12 months. However, domestic pork supplies per person will only be modestly higher given growth in the U.S. population and continued growth in pork exports.
The nation's breeding herd expanded by nearly 2 percent, or 107,000 animals over the past year. Somewhat surprisingly, 65,000 of those animals are in the Eastern Corn Belt states with Indiana's breeding herd up 30,000 head, Illinois up 20,000, Ohio up 10,000 and Wisconsin up 5,000. The other area of expansion was the Plains states of South Dakota (15,000), Colorado (10,000), and Kansas (10,000). In the Western Corn Belt , the expansion in Missouri (15,000) was about offset by a decline in Minnesota (5,000), with Iowa unchanged.
The inventory of market hogs that will come to market this fall and winter are up about 1 percent. The supply of market animals for next spring and summer will come from farrowings this fall (up 1 percent) and winter (up 2 percent). Marketing weights are expected to begin to drop below year-previous levels for this fall and continue lower through next year due to much higher corn prices. Current estimates are for carcass weights to be down by 1.3 pounds, or .6 percent. Pork supplies are expected to be about 1 percent higher this fall and then nearly unchanged in the winter. The modest expansion in farrowings and increasing number of pigs per litter should move pork supplies nearly 3 percent higher for the spring and summer of 2007.
Pork trade continues to be a positive demand factor. For 2006, pork exports are expected to reach 3.0 billion pounds, or about 14 percent of domestic production. The current forecast from USDA is for exports to expand an additional 4 percent next year. This is a sharp slow down from the 2003 to 2006 period when exports expanded by a compound annual rate of 21 percent. The major question will be if Asian pork purchases will hold up with U.S. beef once again flowing. Hog prices averaged $52.40 per live hundredweight this summer. However, prices are expected to dip to the $45 to $48 range for quarterly averages this fall and winter. Prices for next spring and summer are expected to recover once again and average in a range from $48 to $52.
Over the past 12 months, U.S. corn prices averaged $2.03 per bushel. Futures markets are suggesting an average U.S. cash price of about $2.55 for the coming 12 months with prices expanding to the high $2.00 range by next summer. This means estimated hog production costs will rise from the very high $30s this fall to about $43 by next summer. The best news is that hog prices are still expected to be above these costs next summer and allow $6 to $7 per hundredweight of profit. If hogs are about $50 next summer, then corn prices would have to be near $4.25 per bushel to eliminate all profits with other costs holding near today's levels. But, these will be the highest hog prices of the year, with averages closer to $47.
The clear message for the pork industry is to be cautious on further expansion until more is understood about where corn prices are headed and just how the pork industry can utilize distiller's grains. The outlook today says the pork industry can pay $3.00 for corn, but more hogs and less corn is heading in a dangerous direction.
Issued by Chris Hurt
September 18, 2006 - Will United States Wheat Acreage Increase? Planted acreage of wheat in the U.S. has declined steadily since the early 1980s. The relatively high price of wheat currently reflected by the futures market suggests that producers may be interested in increasing planted acreage of winter wheat this fall
Planted acreage of all classes of wheat in the U.S. reached a peak of 88.3 million acres in 1981-82, with harvested acreage exceeding 80.6 million. A combination of increasing foreign wheat production, competition for acreage from other crops, and expansion of the Conservation Research Program (CRP) resulted in a decline in planted acreage to 65.5 million by 1988-89. High prices in 1988-89 and 1989-90 pushed acreage up to 77 million by 1990-91. Acreage has generally declined since then, with occasional annual increases resulting from high prices, particularly in 1995-96. For the current marketing year, planted acreage totaled only 57.1 million acres, with harvested acreage totaling only 47.1 million.
The U.S. average farm price of wheat (all classes) averaged near $3.40 for the three marketing years from 2003-04 through 2005-06. For the current year, the USDA projects the average farm price in a range of $3.95 to $4.45. If the average is near the midpoint of $4.20, it would be the highest in 10 years, but $.35 below the high of 1995-96. The higher prices of wheat are being generated by a small U.S. crop resulting from reduced acreage and a 4-year low average yield of 38.3 bushels; smaller crops in Australia, Canada, the European Union, Russia, and Ukraine; and an expected sharp draw down in world wheat inventories. World wheat production is pegged at 596.1 million tons, 3.6 percent smaller than last year’s crop and 5.2 percent smaller than the record crop of two years ago. On the other hand, world wheat consumption is expected to total 615.8 million tons, resulting in the lowest year-ending stocks-to-use ratio on record. The previous record low was in 1972-7.
Wheat prices started moving higher in December 2005, with December 2006 futures at Chicago moving from about $3.50 to a high just over $4.60 in May 2006. That contract settled at $3.925 on September 15, 2006. The July 2007 futures contract at Chicago reached a high near $4.80 in May 2006 and settled at $4.27 on September 15, 2006. Futures prices at Kansas City (hard red winter) and Minneapolis (hard red spring) have been higher than prices at Chicago (soft red winter wheat). July 2007 futures settled at $4.4175 and $4,655 at Kansas City and Minneapolis, respectively, on September 15.
While the U.S. and world wheat situation is characterized by a small crop and declining stocks, that is not the case for U.S. soft red winter wheat. The 2006 soft red winter wheat crop was estimated at 380 million bushels, 71 million larger than the 2005 harvest. Production of other classes of wheat are down sharply, particularly hard red winter and durum. Consumption of U.S. soft red winter wheat during the current year is projected to be 76 million bushels (24 percent) larger than consumption last year, but year ending stocks are expected to grow modestly. Consumption of all other classes of wheat is expected to decline by 190 million bushels (10 percent) and year-ending stocks are expected to decline by 145 million bushels.
The abundance of soft red winter wheat in an environment of smaller U.S. and world supplies has resulted in very weak basis levels and lower cash prices for that class of wheat. In the month of July, for example, the average cash price received by Illinois wheat producers was estimated at $3.35, $1.18 below the average price received by Kansas producers. On September 15, the average price in southwest Illinois was $.68 under December 2006 futures. The basis at the same time last year was about -$0.33. The weak basis for soft red winter wheat suggests that futures prices at Chicago have been supported at higher levels than warranted by the fundamentals of that crop. A generally weak basis for that class of wheat may persist until the overall U.S. and world wheat supply increases enough to push futures prices lower.
The generally high level of 2007 crop wheat futures suggests that wheat producers may be motivated to increase acreage this year. Cash bids for harvest delivery of soft red winter wheat, however, reflect a very weak basis and lower cash prices than historically implied by futures prices at current levels. Will soft red winter wheat producers increase acreage in response to relatively high futures prices? Or, will acreage be limited by relatively low cash bids for the new crop? The answer has important implications in an environment where a significant increase in corn acreage appears to be needed in 2007.
Issued by Darrel Good
University of Illinois
August 7, 2006 - DTN SIX FACTOR MARKET SUMMARY The corn market should continue to consolidate as traders weigh out weekend weather conditions. The overnight market indicated that the December could look to move below initial support at $2.60 on Monday. Noncommercial (speculative) traders continue to liquidate a small portion of their substantial net-long futures position. Seasonally the market tends to trade sideways through late-August before turning lower through harvest. The underlying fundamentals remain bearish with the December to March spread widening to 77 percent of full commercial carry last week. The sideways trend in the soybean market remains intact, though the structure of the market is beginning to turn more bearish. Noncommercial traders continue to add to their net-short position indicating that the market could soon move lower. The overnight market would seem to confirm this as both the front-month August and new-crop November traded through nearby support levels. The uptrend in the wheat market continues, reflecting the net-long futures position held by noncommercial traders on all three exchanges. However, the Kansas City remains technically bearish and could see additional long-liquidation. The Minneapolis found solid support near $4.67 1/2 and could extend last week's small rally. -- Darin Newsom, DTN Analyst
WEATHER AND USDA REPORTS - August 4, 2006- Corn and soybean prices continue to reflect weather and crop conditions and that will be the case for another six to eight weeks. Price direction will also be provided by USDA reports to be released on August 11.
Corn and soybean crop condition ratings declined each week for the four weeks ended on July 23. As of that date, 59 percent of the corn crop was rated in good or excellent condition, compared to 53 percent on the same date last year. Further deterioration in crop ratings was expected to be reflected in the July 31 report, particularly for western growing areas, due to high temperatures and continued dryness in some areas. On July 23, 54 percent of the soybean crop was rated in good or excellent condition, the same as last year, with further deterioration expected to be reflected in the July 31 report.
The USDA’s first forecast of corn and soybean yield and production potential will be released on August 11. That forecast will reflect farmer surveys (33 states for corn and 29 states for soybeans) and objective yield forecasts (10 states for corn and 11 states for soybeans). With the portion of the crop in either good or excellent condition in the upper 50 percent range for corn and the lower 50 percent range for soybeans, one would expect the August report to show prospects for at least trend yield. However, the subjective nature of the crop condition ratings means that it is not always a good predictor of yield potential. The August yield forecasts will provide the benchmark for the market to judge the potential impact of August weather on final yield estimates. Recent high temperatures and prospects for another round of heat in the second week of August will stress crops in areas of low soil moisture. The amount and coverage of precipitation in early August will be extremely important for yield prospects.
While the price impacts will likely be small, the USDA may also revise the forecasts of use and ending stocks for both crops for the current marketing year. For corn, the focus is on exports. For the year, the USDA currently forecasts corn exports at 2.1 billion bushels, 286 million more than shipped last year and the largest marketing year total since 1995-96. As of July 27, the USDA’s weekly export inspection report indicated cumulative marketing year exports of 1.827 billion bushels. Through July 20, inspections trailed the export estimate in the Export Sales report by 58.2 million bushels. Through May, the estimate in the Export Sales report trailed the Census Bureau estimate by 2.9 million bushels. Exports through July 27, then, may have actually been near 1.888 billion bushels. If so, exports during the last 5 weeks of the marketing year need to average 42.4 million bushels per week to reach the USDA forecast. With large unshipped sales and the recent average export pace of 46 million bushels per week, exports could be marginally above 2.1 billion bushels. Feed and residual use of corn may also exceed the current USDA forecast of 6.1 billion bushels due to poor pasture conditions in the west and high wheat prices. That forecast, however, is less likely to be revised in the August report.
For soybeans, the USDA currently projects the 2005-06 marketing year crush at a record 1.72 billion bushels, 1.4 percent larger than the crush of a year ago. Through the first 10 months of the marketing year, the crush totaled 1.447 billion bushels, 1.5 percent above the cumulative crush of a year earlier. Most of the year over year increase occurred in September 2005, but the total crush in May and June 2006 was 2.9 percent larger than that of a year earlier. Crush during the last two months of the marketing year needs to total only 272.6 million bushels to reach the USDA forecast, 1.2 percent more than crushed last year. It appears that the crush could reach 1.725 billion bushels
Cumulative soybean export inspections through July 27 totaled 871 million bushels. Through July 20, inspections trailed the export estimate in the USDA Export Sales report by 5.3 million bushels. Through May, the estimate in the Export Sales report trailed the Census Bureau estimate by 9 million bushels. Exports as of July 27, then, may have actually been near 885 million bushels. If so, exports need to average only 4 million bushels per week during the final 5 weeks of the year in order to reach the USDA forecast of 905 million bushels. That is less than half the average of the most recent four weeks. With large unshipped sales on the books, it appears that exports could exceed the current USDA forecast by 10 to 20 million bushels.
December 2006 corn futures reached a contract high of $2.88 in late May and traded down to $2.52 last week. November 2006 soybean futures traded to $6.40 in early July and down to $5.92 last week. Prices of both contracts may continue to recover from the lows of last week under the influence of a high rate of consumption and uncertainty about crop size. A surprise in the August 11 reports or a significant decline in crop conditions may be needed, however, for prices to trade above the recent highs.
Issued by Darrel Good
University of Illinois
04.04.06 - click here for the National Corn Growers Association latest report This is a big file, over 6mb
06.07.06 - Ethanol will impact the corn markets this year. The latest USDA report indicates that 78.019 million acres of corn will be planted in 2006. This is 3.74 million less than the planted acreage in 2005, and is the smallest acreage since 2001. Illinois led the way with 700,000 acre (6%) reduction. The reduction was expected, as the United States is coming off a record harvest two years ago, and the second largest crop last year, which increased carryover, and the high inventory pulled the cash markets down. Also, United States corn consumption for the 2005-06 marketing year is expected to be 10.995 billion bushels. Stocks at the end of the year (August 31, 2006) are now projected at 2.241 billion bushels. This will be slightly over 20% of consumption, which compares to 19.8% last year. Although it is quite early, a normal growing season should yield 149 bushels per acre, with harvested acreage of 71.9 million, which would result in a 2006 crop of 10.7 billion bushels of corn.
06.06.06 - As of June 4, 2006, the United States corn crop was 94% emerged, which was up from 85% the previous week. The 94% emergence compares to 94% same date last year, and 89% five year average. Ethanol production continues to explode, and the domestic demand ethanol usage is expect to be as much as the export markets, which is a first. At this rate, corn demand for ethanol production could reach 2.15 billion bushels, or approximately 20% of the United States corn crop. As ethanol production continues to increase, the supply will probably be supported at the expense of the export markets. The DTN National Cash Corn Index dropped down to $2.14 per bushel. In the futures market, corn was recently pressured by favorable warm and dry weather projections, with the forecast for rain later in the week. The CBOT near month contract closed down slightly yesterday, coming in at $2.53 per bushel.
05.02.06 - Press Release CBOT TO LIST AGRICULTURAL FUTURES CONTRACTS ON ITS ELECTRONIC TRADING PLATFORM DURING DAYTIME TRADING HOURS
CHICAGO, IL, April 26, 2006 - The Chicago Board of Trade (CBOT®), one of the world's leading derivatives exchanges, today announced that it is increasing global access to its benchmark Agricultural products by offering trading of CBOT full-sized, physically delivered Agricultural futures contracts on its electronic trading platform during daytime trading hours. On August 1, 2006, the CBOT expects to begin trading its Corn, Wheat, Soybean, Soybean Oil, Soybean Meal, Rough Rice and Oat futures contracts on e-cbot, the Exchange's electronic trading platform, side-by-side with CBOT open auction markets.
Trading hours for the electronically traded Agricultural contracts will be from 6:30 p.m. to 6:00 a.m., and the new daytime hours will be from 9:30 a.m. to 1:15 p.m. (Chicago Time). These new trading hours will continue to expand market access to the CBOT's benchmark Agricultural products to accommodate its global customers, particularly those in the European and Asian time zones.
CBOT Chairman Charles P. Carey said, "Side-by-side trading of the CBOT's benchmark Agricultural products brings together the long-standing trading expertise of the open auction market and the efficiencies and distribution driven by the Exchange's electronic trading platform. This exciting new synergy holds the potential for enhanced trading opportunities for the entire marketplace."
CBOT President and Chief Executive Officer Bernard W. Dan noted, "The move to list our Agricultural contracts on e-cbot during the day was driven by strong customer demand, and it represents an outstanding opportunity for all of our market participants. This historic action extends the reach of the e-cbot platform, and we believe it will create a single pool of liquidity, encompassing both the open auction and electronic environments, in a move that is geared toward attracting new users from around the world."
In addition, the Exchange will list its South American Soybean and Ethanol futures contracts during daytime hours on e-cbot. The CBOT's South American Soybean contract is expected to trade from 6:31 p.m. to 6:00 a.m. and from 9:00 a.m. to 1:15 p.m. beginning Monday, May 15, 2006. The CBOT Ethanol futures contract is expected to trade on e-cbot from 6:36 p.m. to 6:00 a.m. and from 9:30 a.m. to 1:15 p.m. beginning Wednesday, May 31, 2006.
Aside from differing ticker symbols, the contract specifications for the electronically-traded Agricultural products will be the same as those traded on the open auction platform. Therefore, the electronic contracts will be fully fungible with the corresponding open auction contracts.
04.01.06 - Corn stocks in all positions on March 1, 2006 totaled 6.99 billion bushels, up 3 percent from March 1, 2005. Of the total stocks, 4.06 billion bushels are stored on farms, down 2 percent from a year earlier. Off-farm stocks, at 2.93 billion bushels, are up 12 percent from a year ago. The December 2005 - February 2006 indicated disappearance is 2.83 billion bushels, compared with 2.70 billion bushels during the same period last year.Soybeans stored in all positions on March 1, 2006 totaled 1.67 billion bushels, up 21 percent from March 1, 2005. This is the largest March 1 stocks level on record, exceeding the previous record set in 1999 by 1 percent. Soybean stocks stored on farms are estimated at a record high 872 million bushels, up 10 percent from a year ago. Off-farm stocks, at 797 million bushels, are up 36 percent from last March and are also at a record high level. Indicated disappearance for the December 2005 - February 2006 quarter totaled 834 million bushels, down 10 percent from the same period a year earlier. All wheat stored in all positions on March 1, 2006 totaled 972 million bushels, down 1 percent from a year ago. On-farm stocks are estimated at 256 million bushels, down 16 percent from last March. Off-farm stocks, at 716 million bushels, are up 5 percent from a year ago. The December 2005 - February 2006 indicated disappearance is 457 million bushels, up 3 percent from the same period a year earlier.
3.27.06 - The NYBOT #11 raw sugar contract close at 16.62 cents per pound on Monday, and recently traded in the mid 19.0 cent per pound range, hitting 20 year highs. Far month contracts are all trading in the high 15's to low 16's range. Almost all analysts are projecting the continuation of high prices, and some are forecasting pricing it hit 25 cent per pound by the end of 2006. Sugar is a world commodity, and high prices will impact international ethanol prices.
3.20.06 - GUELPH, ON, March 15 - Canada Border Services Agency (CBSA) today issued a final determination (FD) that U.S. grain corn imports to Canada are dumped and subsidized. Under the FD, definitive anti-dumping and countervailing (AD/CV) duties totaling $US1.65/bushel will continue to be imposed until April 18, 2006. Should the Canadian International Trade Tribunalmake a final injury finding on April 18, it appears the duty will continue at $US1.47/bushel.
Encouraged by today's decision, Canadian Corn Producers' (CCP) spokesperson Brian Doidge said "Despite claims to the contrary by some consumers, the provisional AD/CV duties in place since December 15th have increased the price our producers have been able to get for their grain corn. For example, corn basis adjusted for exchange rate is much stronger than normal while basis for soybeans and wheat is much weaker than normal. CCP expects a further increase in corn prices now that CBSA has made the AD/CV duties definitive." Furthermore, CCP is soon expecting a response from CBSA on CCP's recent submission that duty drawback of AD/CV duties is not available for U.S. grain corn imports used to feed livestock that is subsequently exported, or livestock products made from animals fed dumped and subsidized imported U.S. grain corn. Regarding the other prongs of CCP's attack on unfairly traded U.S. grain corn, CCP remains surprised by the Canadian Government's apparent reluctance to commence WTO consultations with the U.S. regarding the illegality of U.S. grain corn subsidies - particularly since some important corn users (including the Canadian Cattlemen's Association and Ontario Pork) have joined CCP's call on the Canadian Government to take action. CCP also continues to lobby the Canadian, Ontario, Quebec and Manitoba governments to put in place an improved joint federal-provincial income support program to help alleviate the injury to Canadian growers caused by unfairly traded U.S. grain corn imports. Canadian Corn Producers is a coalition of Canada's main corn producer associations - namely, Ontario Corn Producers' Association, La Fédération des producteurs de cultures commerciales du Québec, and Manitoba Corn Growers' Association Inc.
01.12.06 - The latest update United States 2005 corn for grain production is estimated at 11.1 billion bushels, up 1 percent from the November forecast but down 6 percent from the 11.8 billion bushels produced in 2004. The average United States grain yield is estimated at 147.9 bushels per acre, down 0.5 bushel from the November forecast and down 12.5 bushels from 2004. The 2005 production and yield estimates are the second largest on record, behind last year. Area harvested for grain, at 75.1 million acres, is up 2 percent from 2004.
01.08.06 - USDA Report - Corn stocks in all positions on December 1, 2005 totaled 9.81 billion bushels, up 4 percent from December 1, 2004. Of the total stocks, 6.33 billion bushels are stored on farms, up 3 percent from a year earlier. Off-farm stocks, at 3.49 billion bushels, are up 5 percent from a year ago. The September - November 2005 indicated disappearance is 3.41 billion bushels, compared with 3.31 billion bushels during the same period last year.
Soybeans stored in all positions on December 1, 2005 totaled 2.50 billion bushels, up 9 percent from December 1, 2004. Soybean stocks stored on farms totaled 1.35 billion bushels, up 3 percent from a year ago. Off-farm stocks, at 1.16 billion bushels, are up 15 percent from last December. Indicated disappearance for September - November 2005 totaled 840 million bushels, down 10 percent from the same period a year earlier.
All wheat stored in all positions on December 1, 2005 totaled 1.43 billion bushels, down slightly from a year ago. On-farm stocks are estimated at 513 million bushels, down 3 percent from last December. Off-farm stocks, at 917 million bushels, are up 2 percent from a year ago. The September - November 2005 indicated disappearance is 494 million bushels, down 3 percent from the same period a year earlier
1.02.06 - The Brazilian sugar cane harvest projection has been cut again
due to a severe drought in the Northeast part of the country. Brazil is the world's largest producer of sugar and fuel ethanol. Recently, sugar prices have jumped to a ten year high, with the New York Board of Trade (NYBOT) closing near 15.0 cents per pound in early January. The Brazilain government lowered its forecast for the harvest to 436.8 million tons, soen from the previous estimate of 440 million tons, which was last updated in August 2005. The original estimate earlier in the year, expected a 450 million ton crop. The harvested for the 2004/2005 crop year was 415.7 million tons. For a full review of the Brazilain sugar and ethanol market, please subscribe to the Ethanol Market Weekly News and Market Report.
12.15.05 - On December 15, 2005, the President of the Canada Border Services Agency (CBSA) made a preliminary determination of dumping and subsidizing respecting unprocessed grain corn, excluding seed corn (for reproductive purposes), sweet corn, and popping corn, originating in or exported from the United States of America, pursuant to subsection 38(1) of the Special Import Measures Act (SIMA). Provisional duty will now be payable on the subject goods that are released from Customs on or after December 15, 2005. On the same date, the President terminated the dumping and subsidy investigation with respect to processed grain corn from the United States of America, pursuant to paragraph 35(2)(a) of SIMA, as a result of the decision by the Tribunal that the evidence did not disclose a reasonable indication that the dumping or subsidizing of processed grain corn was causing or was threatening to cause injury. Briefly stated, processed grain corn results from dry milling operations that separate or remove constituent parts of the whole kernel corn.
The result is that the CBSA has imposed a provisional anti-dumping duty in the amount of US$0.58 per bushel and provisional countervailing duty in the amount of US$1.07 per bushel. That makes a total duty of US$1.65 per bushel or approximately CDN$75.00/mt
11.11.05 - Latest USDA Release -This month's outlook for 2005/06 U.S. corn is for increased production, higher domestic consumption, larger stocks,and lower prices. Forecast 2005 corn production is up 175 million bushels from last month to 11.032 billion bushels (the second largest crop on record). A 75-million-bushel increase in corn used to produce ethanol boosts food, seed, and industrial use by an equal amount. Exports and feed and residual use are unchanged. Corn ending stocks are up 99 million bushels from last month and are 207 million higher than the previous year. The projected 2005/06 price range for corn is $1.60 to $2.00 per bushel, down 5 cents on each end from last month, compared with $2.06 for 2004/05. Forecast U.S. grain sorghum production is up 13 million bushels. Except for a 10-million- bushel increase in grain sorghum feed and residual, no other changes are made in projected use. Grain sorghum ending stocks are up 3 million bushels from last month. The projected 2005/06 price range for grain sorghum is $1.45 to $1.85, down 5 cents on each end from last month, compared with $1.79 for 2004/05.
The global outlook for coarse grains in 2005/06 is for increased production, higher consumption, little change in trade, and larger stocks relative to last month. Foreign production is down less than 1 million tons with the largest declines projected in Brazil, Argentina, and Romania. These losses are partially offset by larger crops in EU-25, Ukraine, and Russia. Foreign 2005/06 coarse grain consumption is little changed with declines in South Korea, Turkey, China, and Japan, mostly offset by increases in EU-25. Global 2005/06 imports and exports are little changed from last month. Imports are down for Japan and South Korea, but up for Brazil. Exports are up for Ukraine, Russia, and Turkey, but down for Argentina, EU-25, and Romania. Global 2005/06 ending stocks rise 2.4 million tons from last month but foreign stocks are down fractionally.
10.17.05 - The DTN National Corn Index is $1.5793 pr bushel. The corn harvest is 49% as of Sunday October, 16, 2005.
10.15.05 - For the quarter ended September 30, 2005, Corn Products International (New York Stock Exchange - CPO) reported diluted earnings per share of $0.31, a 3 percent decline from diluted EPS of $0.32 in the same period in 2004. The quarter's results include the unfavorable effect of $0.07 per diluted share due to a change in the Company's effective tax rate to 45 percent in the quarter, up from 33 percent last year. As previously announced, the change in the effective tax rate relates to the mix between expected US and foreign income. "We are pleased that both gross profit and operating income improved versus last year's third quarter," said Sam Scott, chairman, president and chief executive officer. "Operating income in Mexico returned to 2001 levels, and our Asia/Africa region continued to benefit from its ongoing recovery. These gains offset the effects of operational issues in our US business and a significant year-over-year increase in energy costs." Results for the third quarter 2005 as compared to the same period in 2004 were as follows: - Net sales were $612 million, up from $587 million - Operating income was $52 million, up from $46 million - Net income was $23 million, down from $24 million
10.01.05 - The Corn Refiners Welcome First Step in Addressing HFCS Dispute With Mexico - Press release, October 1, 2005
Washington, DC--The Corn Refiners Association Sept. 30 welcomed the recent allocation allowing imports of 250,000 metric tons of U.S. high fructose corn syrup (HFCS) into Mexico as a first step in the right direction to begin to address the longstanding dispute with Mexico. "This dispute has exacted a heavy toll on U.S. corn farmers and refiners," said Audrae Erickson, president of the Corn Refiners Association. "We appreciate efforts by the administration to address this longstanding dispute, but note that the 250,000 metric ton allocation is significantly less than the market demand for sugar in the United States and fails to compensate our industry for the near closure of the Mexican market for the past four years." "We expect Mexico to live up to its commitment to immediately accept an equal amount of U.S. HFCS exports without delay or restraints," continued Erickson. "We look forward to working with the administration to find a full resolution to this dispute and put sweetener trade with Mexico on solid footing as we approach the fully open markets promised under the NAFTA in 2008." A 20 percent tax on beverages sweetened with HFCS, enacted by the Mexican Congress effective in January 2002, shut down U.S. sales of HFCS to Mexico for nearly four years. Losses of $944 million in HFCS sales, equivalent to 168 million bushels of corn, are sustained every year that the tax is in place, with additional sizable losses to investments. Full resolution of the dispute could increase the price per bushel of corn by $0.10 in key corn states, or $0.06 nationally. Since 1997, the sweetener impasse with Mexico has resulted in more than $3 billion of lost HFCS sales, both HFCS exports and U.S. owned HFCS sales in Mexico, or 672 million bushels of corn production, including lost corn sales to Mexico intended for sweetener production.
9.20.05 - The 2005 corn crop is now forecast higher than the prior estimate, but is still below the record 2004 crop. Meanwhile, supplies are plentiful and ending stocks will be high. Furthermore, exports have been have been reduced due to the impact of Hurricane Katrina, which reduced movement through the Mississippi.
Corn production is now forecast at 10.639 billion bushels, which is up 289 million bushels from last months estimate. The 2005 crop estimate is 1.168 billion bushels below last years record crop production.
The average yield is now forecast at 143.2 bushels per acre, which is higher than last months estimate of 139.2 bushels per acre, and way off the 2004 yield of 160.4 bushels per acre. Forecast stalk counts are down 2% and the ears per acre are down 4% below last years total.
Farmers in the United States are forecasted to harvest 74.3 million aces of corn, which is down 50,000 acres from the August estimate, but up 1% from 2004. This is an interesting statistic. An even more interesting statistic is that the ending stocks for 2004/22005 increased again from the prior month estimate, and are expected to be the largest since the 1987/1988 crop year. Forecasted 2005/2006 corn usage estimate increased 125 million bushels from last month, and is now up to a record 10.7 billion bushels, which is up 45 million bushels from 2004/2005. Feed and residual use forecast increased 75 million bushels, but is still 325 million bushels below the 2004/2005 crop year. Exports, even with the Katrina impact, are now forecast to be up 50 million bushels, to 2 billion bushels, which would be the highest export total since the 1995/19996 crop year.
With these BIG numbers, the forecast price for the 2005/2006 crop year is now 170 to 210 cents per bushel, which is lower than last months estimate of 180 to 220 cent per bushel. The season average price received by farmers for 2004/2005 is expected to be 206 cents per bushel. Prices right now, cash prices are very low, due to the back up caused by the export difficulties, and high inventories. In fact, point basis levels are extremely low, providing for some excellent buying opportunities. Friday, Northern and Western Illinois grain dealers are quoted shelled corn bids at 159 to 174 cents per bushel. Central Illinois was steady to 2 cents lower, at 164 to 174 cents per bushel. And, Southern Illinois corn bids were mixed at 151 to 169 cents per bushel.
09.14.05 - The latest USDA United States corn production forecast is now at 10.6 billion bushels, which is up 289 million bushels (3%), from the previous month forecast, but way off (10% below) last years record production. Even so, with all of the drought, 2005 would be the second largest corn crop production on record. Based on conditions as of September 1, yields are expected to average 143.2 bushels per acre, up 4.0 bushels from August but 17.2 bushels below the record high last year. Projected beginning stocks of 2005/06 corn will increase 15 million bushels due to a reduction in 2004/05 exports, strongly influenced by the effects of Hurricane Katrina. Corn exports are moving, but at a very slow pace. Although grain exports have come back on line throughout the lower Mississippi River, many roadblocks remain, such as labor, fuel and electricity.
The soybean estimate was 65 million bushels above the August estimate at 2.856 billion bushels
Forecast yields are down from the previous year in all Corn Belt States except Michigan and Wisconsin. Compared with last year, the largest yield decreases are expected in Missouri, Illinois, Kentucky, and New Jersey. Farmers expect to harvest 74.3 million acres of corn for grain, down 50,000 acres from August but up 1 percent from 2004.
Meanwhile, world corn stocks are projected to be quite tight, but the markets are not reacting because most of the world shortage is in poorer countries that do not have the ability to buy much grain. Same forecast, different week, hot, dry and windy weather is forecast throughout most of the corm belt, which will dry out the fields and the corn even more.
Futures markets traded down again, with September trading at 198.4 cents per bushel. The other contracts are in the chart below. The DTN National Cash Corn index in 169 cents per bushel. Northern and Western Illinois grain dealers were quoting shelled corn bids mostly 3 to 5 cents lower, at 166 to 176 cents per bushel. Central Illinois grain elevators were quoting shelled corn 4 to 6 cents lower at 172 to 182 cents per bushel. Shelled corn in Southern Illinois was 3 to 5 cents lower at 165 to 177 cents per bushel.
Gluten Feed (21%); Gluten Feed Meal (60%); Distillers Dried Grains; Crude Corn Oil
Gluten feed 21% Interior Points was steady to $9 lower, from $38 to $57; Chicago was steady to $12 lower on a few offers, from $38 to $57 per ton. Gluten meal 60% Interior Points was steady to $10 lower from $300 to $310 per ton; Chicago was $5 to $15 lower form $290 to $320 per ton. DDGS Central Illinois was $4 lower to $3 higher, from $65 to $72; Lawrenceburg was steady at $80; Nebraska was steady to $5 lower form $85 to $90; Minnesota was steady from $70 to $72; and Kansas was steady from $80 to $85 per ton.
Crude corn oil was 25 points lower from 27.25 to 28.75 cents per pound.
03.12.05 - The USDA final numbers for 2004 confirm a record breaking year. The United States corn production totaled 11.8 billion bushels, which was up 17% from 2003. Even more amazing is the yield. The 2004 crop yield totaled 160.4 bushels per acre, which was an 18% increase from 2003. Record high yields were reported in 24 of the 40 corn producing states. Acreage planted in 2004 totaled 80.9 million acres, which is 3% above 2003, and 73.6 million acres were harvested, compared to 70.9 in 2003. The United States ethanol used 1.4 billion bushels of the 2004 crop for the production ethanol, representing 12% of the total production. Iowa, Illinois, Nebraska and Minnesota were the leading corn producing states in 2004.
81% of the Untied States fuel ethanol capacity is in the same four states, plus South Dakota. Ethanol supports the corn demand, and will be a significant and growing factor for corn utilization in the coming years.
The USDA projected price range for 2005 corn was recently increased. The current projected price range for corn $1.95 to $2.15 per bushel, which is up $.10 of both the top end and low end. Even with adequate stocks, the projected prices were raised because the corn prices received by farmers (as reported by NASS) have consistently remained above spot prices. This is a confirmed indication that the farmers forward contracted more corn than expected, and as a result, are receiving the prices when the corn was higher.
02.24.05 - The European Union still is not able to reach conclusion regarding the importation of genetically modified corn. Specifically, the concern is a Monsanto product designed to resist rootworms. These types of products are very controversial in Europe, due to health and environmental concerns.
11.13.04 - The USDA increased the November estimate up 1% above the previous October number. Corn production is forecast at 11.7 billion bushels, up 1 percent from last month and 16 percent above 2003. Based on conditions as of November 1, the yield is expected to average 160.2 bushels per acre, up 1.8 bushels from October and 18.0 bushels above last year. If realized, both production and yield would be the largest on record. The previous records for both were set last year when production was estimated at 10.1 billion bushels and yield was 142.2 bushels per acre. Across the U.S., yields are forecast at record high levels in 19 of the 33 published corn States. With the exception of Wisconsin, yields in the Corn Belt States are forecast at record highs as weather conditions have been mostly favorable throughout the growing season.
10.15.04 - The USDA has increased the corn crop production estimates again. The last estimate is 11.6 billion bushels, with a yield of over 158 bushels per acre, both are all time records.
9.15.04 - Corn production is forecast now at 11.0 billion bushels, up fractionally from last month and 8 percent above 2003. Based on conditions as of September 1, yields are expected to average 149.4 bushels per acre, up 0.5 bushel from August and 7.2 bushels above last year. If realized, both production and yield would be the largest on record. The previous record for both was set last year when production was estimated at 10.1 billion bushels and yield was 142.2 bushels per acre. Yields are forecast at record high levels in all Corn Belt States, except Minnesota and Wisconsin, as weather conditions have been mostly favorable throughout the growing season. However, brief periods of freezing temperatures in the northern Corn Belt and adjacent areas of the Great Plains raised concerns about the crop being able to fully develop before a killing frost occurs.
9.9.04 - On September 10th, the USDA's estimate of 2004-2005 U.S. ending stocks increased from 1.132 million bushels to 1.209 billion bushels, up from the previous year's 954 milllion bushels. Production is expected to total 10.96 billion bushels and usage is expected at 10.72 billion bushels. This puts the ending stocks to use ratio at 11%. On the world scene, the USDA is looking for the 2004-2005 ending stocks to fall from 94 to 88 million tons, or 13% of total use. In 2004-2005, exports are expected to increase 11%. As of September 12th, 69% of the corn crop was rated good to excellent, up from 44% a year ago. The 2002 farm bill set a $1.98 billion loan rate for two years, ensuring that production levels stay high unless the weather interferes.
8.13.04 - The 2004 corn crop is expected to come in at 10.9 billion bushels, which is up 8% from last year, and 22% from 2002. Yields are expected to reach a record 148.9 bushels per acre, which is up 6.7 bushels from last year. The previous records, both set in 2003, was a harvest of 10.1 billion bushels, and 142.2 bushels per acre. 08.02.04 - NYBOT March 2005 Sugar #11 closed at 8.32 and May 2005 closed at 8.54 per pound, confirming the trend for higher prices.
07.30.04 - World sugar price continue to increase. The NYBOT October Sugar #11 close of 8.28 cents per pound confirms the trend - higher prices. Additional details and information available in theEthanolMarket.com newsletter.
07.26.04 - The USDA projects the 2004/2005 corn crop to be 10.635 billion bushels. The estimate is up 201 million bushels from the prior month estimate, and 521 million bushels above last year. USDA estimates 81 million acres of corn was planted, which is up 3% above both 2002 and 2003.
07.14.04 - Attached is a copy of the letter from Dee Vaughn, President of the National Corn Growers Association(NCGA). The letter addresses the NCGA concerns regarding Cargill's intention to import Brazilain Ethanol through El Salvador, in the United States. TheNCGA Letteris dated May 10, 2004. A letter from Senator Tom Daschle addresses the same issueTom Daschle letter
04.08.04 - May corn ended slightly over $3.30 per bushel. December is was around $3.36 per bushel. Central Illinois average cash prices...More
Corn markets are bullish. USDA reports ending stocks at 856 million bushels, down from previous expectations of 850 to 900 million bushels...More
USDA slightly reduced the 2003 corn crop down to 10.28 billion bushels...More
Expected corn acreage plantings for 2004 will be 79 million acres, just slightly above the previous two years. Corn acreage is expected to increase in the Corn Belt, mainly due to demand generated from fuel ethanol production. Acreage is expected to slightly decrease in the Southeast, favoring soybeans and cotton. Corn acreage is expected to be up fractionally, wheat down 4%, cotton up 7% and soybeans up 3%...More