Urbana, Illinois
June 16, 2008
While corn prices have moved
sharply higher as production expectations were scaled back, it
is still not clear how much rationing will be required during
the 2008-09 marketing year, said a University of
Illinois Extension marketing specialist.
"The widespread concern about food price inflation leads to
questions about the potential for market intervention if crop
prices remain high or move higher," said Darrel Good. "Some
intervention occurred earlier as a number of countries adapted
policies to restrict exports or encourage imports in the face of
high prices.
"The USDA will release its annual Acreage report on June
30. It may provide some insight into potential crop size," said
Darrel Good. "However, some acreage had not yet been planted or
re-planted at the time of data collection. The report then will
still reflect a fair amount of planting intentions.
"Harvested acreage for grain may also be difficult to anticipate
with the recent widespread flooding."
He added that the USDA's quarterly Hogs and Pigs report will be
released on June 27 and may give some hint of how livestock
producers are responding to higher feed prices. Responses,
however, may not completely reflect the recent surge in feed
prices.
Good's comments came as he reviewed expectations for the 2008
U.S. corn crop after the USDA's World Agricultural Outlook Board
lowered its expectation of the crop's size from 12.125 billion
bushels in May to 11.735 billion in June.
"Extensive flooding in parts of the Midwest suggests that
production potential may be declining even further," he said.
Consumption of U.S. corn during the 2008-09 marketing year will
likely have to be less than the record 12.96 billion bushels
projected for the current marketing year.
"Historically, much of the reduced consumption in years of tight
supplies and high prices came in the domestic feed and residual
category," he said. "The most recent examples included 1980,
1983, 1993, 1995, 2002, and 2006. In those seven years, feed and
residual use declined by an average of about 11 percent from use
during the previous marketing year. The range was from 5
percent--2002-03--to 18 percent--1988-89."
U.S. corn exports also declined in the 1993-94 marketing year
(20 percent) and in the 2002-03 marketing year (17 percent).
Both of those years were characterized by extremely large coarse
grain crops in the rest of the world.
Production outside the United States in 1993-94 was record
large, exceeding the previous record of 1990-91 by 2.5 percent.
Foreign production in 2002-03 was only fractionally smaller than
the large crop of the previous year and only 1.9 percent smaller
than the previous record of 1996-97.
"Only in 1995-96 did domestic use of corn for food and
industrial purposes decline from the level of the previous
year," he said. "The cut totaled 87 million bushels, or 5.1
percent, of the previous year's use."
The current World Agricultural Outlook Board projections for
consumption of U.S. corn during the 2008-09 marketing year are
consistent with historical patterns. Feed and residual use is
projected to decline by 16.3 percent. Exports are expected to
decline by 21.2 percent, reflecting the forecast of a
record-large coarse grain crop outside the United States as well
as a record-large world wheat crop.
Domestic consumption of corn for ethanol is expected to increase
by one billion bushels (33 percent) while use of corn for all
other food and industrial uses is expected to equal that of the
current marketing year.
"While feed and residual use of sorghum is expected to increase,
the total consumption of sorghum, barley, oats, and wheat is
expected to decline by about 3.4 percent," said Good. "The cut
in domestic feed and residual use of corn will be accomplished
in a number of ways.
"The USDA expects the number of grain-consuming animal units to
decline by 1.1 million, or about 1.2 percent. Domestic feeding
of soybean meal is expected to increase by nearly 1 percent and
we project that domestic feeding of distillers grains could
increase by about 32 percent."
Adding the projections for the various categories suggests that
total feed and residual use of grain and protein will decline by
8.5 percent and that use per animal unit will decline by nearly
8 percent.
"Estimated consumption per animal during the current year,
however, is very high and may reflect an overestimate of the
size of the 2007 U.S. corn crop," he said. "Still, consumption
per animal unit during the 2008-09 marketing year is expected to
be near the lowest level of the past 10 years. Some of the
reduction may be offset by increased feeding of hay and forage
made available by the CRP initiative described two weeks ago."
Good added that a fair amount of crop loss and demand rationing
are already priced into the corn market with December 2008
futures approaching $8.
"The worst of the crop stress may have passed and more favorable
growing conditions are forecast," he said. "Corn prices may now
moderate somewhat, at least until more is known about crop
size."
By Bob Sampson, University of
Illinois |
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