Urbana, Illinois
Decmber 16, 2008
Total planted acreage of all crops
could drop substantially if crop prices remain generally low, said a University of
Illinois Extension marketing specialist.
"Within that context, however, an increase in corn acreage
may be needed," said Darrel Good. "It appears that winter wheat
seedings, particularly of soft red winter wheat, have declined
from 2007 seedings. The USDA will provide an estimate of those
seedings on Jan. 12, 2009.
"If the market anticipates a return to a trend soybean yield in
2009, an increase in soybean acreage will not be required. It
appears, then, that corn will not have to compete directly with
soybeans for acreage in 2009. That acreage 'battle' in 2009 will
be to keep acreage in crop production and to accommodate a small
increase in corn acreage."
Good's comments came as he reviewed the USDA's Dec. 11 reports
of world supply and demand prospects which were generally viewed
as negative for corn prices.
"Corn prices, however, increased by more than 40 cents following
the release of the new reports," Good noted.
For the current marketing year, the USDA increased the estimated
size of the Chinese corn crop by nearly 160 million bushels. The
projection of marketing year exports of Chinese corn was not
increased, but some believe China will export more than the 20
million bushels currently projected by the USDA. Year-ending
stocks of corn outside of the United States are now expected to
about equal the stocks on hand at the beginning of the year.
"For the United States, the USDA lowered the projection of corn
use for ethanol production by 300 million bushels, reflecting
lower gasoline prices and tighter processing margins," said
Good. "Ethanol production may not exceed the mandated level in
2009.
"In addition, the forecast of marketing year exports was reduced
by 100 million bushels as a result of the slow start to exports
this year and the larger supplies of grain in the rest of the
world."
The reductions were only partly offset by an increase of 50
million bushels in projected feed and residual use of corn, he
added. That increase reflected prospects for reduced supplies of
distillers grains from the ethanol industry.
The first indication of the rate of feed and residual use will
come from the estimate of Dec. 1 inventories to be released on
Jan. 12, 2009.
"Use of U.S. corn during the current year is projected at 12.185
billion bushels, 588 million less than during the 2007-08
marketing year," he said. "Year-ending stocks are projected at a
comfortable 1.474 billion bushels, only 150 million less than
inventory at the start of the year.
"The new projects not only have implications for prices during
the current year, but are important for assessing acreage needs
in 2009."
Corn acreage needs in 2009 are a function of expected
year-ending stocks, expected consumption next year, expected
yield, and an assessment of minimum year-ending stocks in
2009-10.
Use in 2009-10 may increase to 12.8 billion bushels, reflecting
an increase in ethanol production to meet the higher mandate, a
rebound in exports, and a small reduction in feed use.
"If the U.S. average yield is near 155 bushels, and stock levels
can be reduced by 200 million bushels, 81.2 million acres of
corn will need to be harvested for grain in 2009," said Good.
"That would require planted acreage of about 88.3 million, 2.4
million more than planted in 2008."
Corn prices moved higher following the report due to an increase
in crude oil prices and some private forecast that corn acreage
will decline in 2009.
"Such forecasts are obviously premature since relative prices in
early 2009 will determine corn planting intentions," said Good.
"Producers likely have more acreage flexibility in 2009 than in
most years since many have delayed fertilizer applications.
"Forecasts of reduced acreage, however, did draw attention to
the fact that corn prices had become undervalued relative to
soybean prices."
Good said that acreage decisions in 2009 will be especially
interesting. From 2006 to 2008, planted area of crop land in the
United States increased by nine million acres, while harvested
acreage of hay declined by only about 500,000 acres.
"A portion of the increase in crop land came from expiring
Conservation Reserve Program contracts, but the majority
reflected the impact of high prices in drawing non-crop land
acreage into production.
"Unless price levels increase by early 2009, some of that
acreage may go back to previous uses."
He added that the USDA will release a Prospective Plantings
report on March 31, 2009.
"The most important number in that report will be the total
number of acres expected to be planted in 2009," he said.
By Bob Sampson, University of
Illinois |
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