Urbana, Illinois
February 11, 2008
The USDA’s February report of U.S.
and world crop supply and consumption prospects underscores the
need for large crops in 2008, said a University of
Illinois Extension marketing specialist.
“The report confirmed prospects for larger exports and smaller
year-ending stocks of U.S. soybeans and wheat. Projections of
the use and stocks of U.S. corn during the current marketing
year were unchanged,” said Darrel Good.
According to Good, exports of U.S. wheat during the current
marketing year are projected at a 12-year high of 1.2 billion
bushels, 25 million bushels more 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,” said Good.
He added that soybean exports for the year are expected to be
down 10 percent, but that 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,” Good said.
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, he said.
“The USDA made no changes in the projections of use of U.S. corn
during the current marketing year, although many had expected an
increase in the projection of corn exports and a resulting
reduction in the level of year-ending stocks,” he said.
As expected, the projected size of the current Argentine crop
and subsequent exports was lowered by about 40 million bushels,
but the projection of South African production and exports were
increased by a similar amount.
Still, the pace of U.S. exports is large, said Good, with the
USDA projecting a 15 percent year-over-year increase in exports.
Shipments during the first five months of the marketing year
were up about 15 percent (with inspections up nearly 18
percent).
As with soybeans, however, unshipped export sales as of January
31 were very large. Sales of 779.5 million bushels were 69
percent larger than those of a year ago, he said.
“Corn and soybean prices continue at high levels,” said Good.
“The average settlement price of December 2008 corn futures
during the first six business days of February was $5.27. Unless
that contract averages less than $4.69 for the rest of the
month, the average ‘spring price’ for revenue insurance products
will be above $5.00.”
For soybeans, the average of November 2008 futures during the
same six days was $12.805, he said. “If that contract averages
above $11.655 for the rest of the month, the ‘spring price’ for
revenue insurance products will be above $12.00.”
As a result, revenue insurance products will offer excellent
“put option” protection on insured bushels. “Producers are faced
with managing the risk of uninsured bushels and then making
pricing decision if prices move above the spring average,” he
said.
“The low level of year-ending stocks has important implications
for production requirements in 2008,” he added. “If use of U.S.
soybeans during the 2008-09 marketing year is slightly less than
the three billion bushels projected for this year and
year-ending stocks are held at 160 million bushels, the 2008
crop needs to reach 2.9 billion bushels.”
“With a U.S. average yield of 42.5 bushels, a crop of that size
would require harvested acreage of 68.2 million and planted
acreage of about 69 million. That is 5.4 million more than
planted in 2007,” he said.
According to Good, corn use during the 2008-09 marketing year
could exceed projections for this year by 300 million bushels,
as a result of increased ethanol production and reduced exports
and domestic feeding.
Use of 13.255 billion bushels and year-ending stocks of 1.2
billion imply the need for a 13 billion bushel corn crop in
2008, said the specialist.
“An average yield of 152.5 bushels implies the need for
harvested acreage of 85.25 million and planted acreage of about
92.4 million. That is only 1.2 million less than planted in
2007,” he said.
U.S. wheat exports are likely to decline in 2008-09 as world
production rebounds. “To maintain stocks at the projected very
low level of this year, the 2008 harvest needs to be near 2.2
billion bushels. An average yield of 41 bushels implies the need
for 53.7 million harvested acres and planted acres of about 63
million.
“That is 2.6 million more than planted last year. Winter wheat
seedings are up about 1.6 million, implying the need for an
additional one million acres of spring wheat,” he said.
The USDA’s Prospective Plantings report to be released on March
31 will have important price implications, he added.
By Phyllis Picklesimer, University of
Illinois |
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