Urbana, Illinois
March 31, 2008
Corn producers should find good
news in three recent USDA reports, said a University of
Illinois Extension marketing specialist.
"The USDA's quarterly Hogs and Pigs report, the quarterly Grain
Stocks report, and the annual Prospective Plantings report all
appeared to be supportive for corn prices," said Darrel Good.
"The Prospective Plantings report provides a benchmark for
anticipating actual planted acreage. Planting season weather and
changes in relative prices will be monitored closely for judging
changes from intentions. The big question is, will corn
producers really leave so much money on the table?"
Good's comments came as he reviewed the three reports.
In the pork industry, the USDA reported that the U.S. winter pig
crop was 7 percent larger than the crop of a year ago, compared
to expectations of a 4.5 percent larger crop. A year-over-year
reduction in the number of sows farrowing is not expected until
the summer quarter of 2008.
"Large hog numbers bode well for feed demand, and that was
reflected in the March 1 corn inventory estimate," said Good.
"March 1 stocks were reported at 6.859 billion bushels compared
to our projection of seven billion and the average trade guess
of 7.076 billion bushels.
"The March report follows a December stocks estimate that was
also considerably less than expected. The stocks estimates
suggest that feed and residual use of corn during the first half
of the 2007-08 marketing year was 12.8 percent larger than use
during the first half of the 2006-07 marketing year. These
comparisons suggest that either the 2006 crop may have been
underestimated or the 2007 crop may have been overestimated.
Regardless, current stocks are much smaller than expected."
Corn producers reported intentions to plant 86.014 million acres
of corn in 2008, 7.586 million fewer acres than planted last
year and 1.37 million less than expected.
"The intention to reduce corn acreage is widespread," he noted.
Among the large producing states, acreage is expected to
increase only in Texas. Intended acreage is down one million
acres in Iowa, 800,000 in Indiana, and 600,000 in Illinois.
"With an optimistic U.S. average yield of 155 bushels,
production in 2008 would project to about 12.2 billion bushels,"
said Good. "That is 755 million less than the projection of use
during the current marketing year. Use is expected to remain at
least that large in 2008-09."
Good observed that it appears intended acreage of corn is not
sufficient to supply the projected rate of consumption and
implies that corn prices will have to increase to slow
consumption and/or producers will have to plant more acreage
than intended.
"Projected costs of production, trend yields, and average
overnight harvest bids on March 28 indicated that corn
production in Illinois was potentially more profitable than
soybean production by $125 to $190 per acre, depending on the
area of the state," he said. "The margin increased another $50
per acre at the open of futures trade on March 31."
On the surface, the March 1 stocks estimate and planting
intentions for soybeans appear to be negative for soybean
prices, even though those prices have declined sharply since the
first of March. March 1 stocks of soybeans were estimated at
1.428 billion bushels, 76 million larger than the average trade
guess.
"The stocks estimate implies that feed, seed, and residual use
of soybeans during the first half of the year totaled only 45
million bushels," said Good. "In the previous five years, use in
that category during the first half of the year ranged from 148
to 188 million bushels.
"The low number this year suggests that the 2007 crop may have
been underestimated."
Soybean producers reported intentions to plant 74.793 million
acres in 2008. That is 11.162 million more than planted in 2007
and 3.27 million more than generally expected. The planned
increase in soybean acreage is widespread.
"Intentions exceeded last year's plantings by 1.25 million acres
in Iowa, 1.2 million in Nebraska, 900,000 in North Dakota,
850,000 in Minnesota, 800,000 in Indiana, and 600,000 in four
states including Illinois," he said. "If 74.8 million acres are
planted, harvested acreage might be near 73.8 million. With a
national average yield near 42.5 bushels, the 2008 crop would
total about 3.14 billion bushels, 115 million more than the
level of consumption expected during the current marketing year.
"Current price relationships suggest that actual planted acreage
of soybeans in 2008 should fall short of intentions."
The USDA reported winter wheat seedings at about 46.84 million,
1.853 million more than planted last year and 230,000 more than
reported in January. Combined planting intentions for durum and
other spring wheat total 16.963 million, 1.517 million more than
planted last year.
"Intentions are to reduce sorghum acreage by 303,000 and cotton
acreage by 1.44 million," he said. "Acreage of oilseeds other
than soybeans is expected to increase by 118,000.
"Planted acreage for all crops included in the Prospective
Plantings report exceeds last year's planted acreage by about
4.8 million acres. Harvested acreage is expected to decline by
1.04 million."
By Bob Sampson, University of
Illinois |
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