Total planted acreage of crops could drop

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URBANA, Ill. — 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 winter wheat seedings, particularly of soft red winter wheat, have declined from 2007 seedings. The USDA will provide an estimate of those seedings Jan. 12.

“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, 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.”

Supply and demand

Good’s comments came as he reviewed the U.S. Department of Agriculture’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.

Chinese corn crop

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 U.S. are now expected to about equal the stocks on hand at the beginning of the year.

“For the U.S., 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.”

Partly offset

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 Jan. 12.

“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

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.”

Moved higher

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 corn prices had become undervalued relative to soybean prices.”

Interesting

Good said acreage decisions in 2009 will be especially interesting. From 2006 to 2008, planted area of crop land in the U.S. increased by 9 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.”

Prospective Plantings report

He added the USDA will release a Prospective Plantings report March 31.

“The most important number in that report will be the total number of acres expected to be planted in 2009,” he said.

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