Urbana, Illinois
May 5, 2008
Assuming that the majority of the
corn crop gets planted before the middle of May, prospects for a
2008 average U.S. yield at or above trend will be maintained, said a University of
Illinois Extension marketing specialist.
"The question is whether trend yield will be sufficient,"
said Darrel Good. "An estimate of actual planted acres will not
be available until June 30.
"In addition, even with timely planting, yields are still mostly
dependent on summer weather conditions."
Good's comments came as he reviewed corn production prospects
which he termed "uncertain."
The USDA's Prospective Plantings report released on March 31
provided much of the fuel for the spring rally in corn prices.
Corn producers reported intentions to plant only 86.014 million
acres of corn, nearly 7.6 million fewer acres than planted in
2007. Intentions were well below expectations and well below the
magnitude of acreage needed to allow corn consumption to
continue at the current rate of 13.11 billion bushels per year.
"It may be that the size of the market for U.S. corn will not
grow during the 2008-09 marketing year even without further
price increases," said Good. "There is some evidence, for
example, that hog producers are reducing the size of the
breeding herd, pointing to a decline in the number of hogs to be
fed in 2009.
"Exports of U.S. corn may decline modestly from the record level
being experienced this year if world wheat production rebounds
and if the U.S. dollar strengthens. The size of the Chinese corn
crop and subsequent trade policies, however, will also be
important for U.S. corn export demand."
Good noted that ethanol demand for corn is also a little more
uncertain as policymakers debate proposals to reduce the level
of biofuels production mandates and the magnitude of the
blender's tax credit.
"Changing the level of mandates, however, would likely have very
little short-term impact on the demand for corn to produce
ethanol if the economics of production remains favorable," he
said. "The level of the tax credit has a more direct impact on
the returns to ethanol production. At current prices for corn
and ethanol, however, corn-based ethanol production would remain
profitable even with a modestly lower blender's tax credit."
The USDA's World Agricultural Outlook Board will release the
first supply, demand, and price projections for the 2008-09 U.S.
corn marketing year on May 9. Those projections will likely show
a lower level of consumption in the year ahead than is currently
projected for the 2007-08 marketing year.
"The smaller projection will be, in part, forced by a production
forecast constrained by intended plantings and trend yield,"
said Good. "The potential size of the corn market at current
price levels is extremely important in evaluating the size of
the 2008 U.S. corn crop needed to avoid rationing of use by
higher prices.
"If, for example, market size is seen as 13 billion bushels, the
2008 crop needs to be at least 12.7 billion bushels to maintain
year-ending stocks at or above one billion bushels. If 86.014
million acres of corn are planted, harvested acreage for grain
would likely be near 79 million acres under average weather
conditions."
Therefore, he added, a crop of 12.7 billion bushels would
require a national average corn yield of 160.8 bushels, nearly
10 bushels above the 2007 average.
"Even with a potential market for only 12.5 billion bushels, the
U.S. crop would need to be near 12.2 bushels, requiring a
national average yield of about 154.4 bushels per acre to
maintain year-ending stocks at one billion bushels," he said.
There is some possibility that planted acreage of corn will
exceed intentions reported in March. The market will monitor the
USDA's weekly report of planting progress to evaluate both the
likely magnitude of planted acreage and average yield potential.
"Rapid planting would favor an increase in acreage and at least
a trend yield," he said. "Planting progress in April was
generally very slow, with only 10 percent of the crop planted as
of April 27, compared to 20 percent last year and the five-year
average of 35 percent.
"Rapid planting during the first two weeks of May would still
support expectations for more planted acreage and expectations
for at least a trend yield in 2008."
Even with a slower rate of planting than expected, corn prices
stabilized last week.
"There is a general perception that, given a window of
opportunity, producers can now plant the crop more rapidly than
in the past," said Good.
"While modern planting systems clearly allow individual
producers to plant more acres per day, there is no clear
evidence that in aggregate the corn crop actually gets planted
more rapidly in recent years than three or four decades ago."
By Bob Sampson, University of
Illinois |
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