Tuesday, March 10, 2009

By Stu Ellis

The Grain and Oilseed Outlook for 2009 is a joint effort by the World Agricultural Outlook Board, the Economic Research Service, the Farm Service Agency, and the Foreign Agricultural Service, so quite a bit of energy was spent in creating the forecast. The economists say their outlook is driven by declining commodity prices and a net return outlook less favorable than 2008.

Because of the decline in prices, total acreage, weak global demand, market volatility, higher input prices, higher costs of fertilizer, and prospects for more global competition, the economists say the combination of corn, bean, and wheat acres will drop 3.8 million from last year to 221 million.

Corn acres will be unchanged at 86 million because of the net return outlook for corn versus soybeans, but the drop in net returns for corn will limit any sharp increase in acres. New crop production plus the carry-in from last year will make 14.170 billion bushels available for use in the 2009/2010 marketing year.

The national average yield is projected at 156.9 bushels per acre. Domestic use is forecast at 10.6 billion bushels, up 4% from the current year due to higher ethanol demand. Feed use will be 5.2 billion, down 2% as livestock herd numbers drop and more corn is replaced by DDGS.

Industrial use is forecast at 5.2 billion, up slightly, helped by a 14% increase in ethanol demand. While ethanol capacity is up to 12.4 billion gallons, 2009 operating capacity will be only at 10.5 billion gallons. Corn exports will be 1.85 billion bushel, with more competition from Argentina and less from Brazil.

Ending stocks will be down 4% with a stocks to use ratio at 13.8%. The season average price is forecast at $3.60, held up by many producers previously benefiting from good prices in forward contracts.

Soybean acres will be up 1.3 million to 77 million, with nibbles at wheat, cotton, and peanut acres. Expansion is limited by lower soybean prices, and less double cropping. Soybean supplies will be 3.453 billion bushels, up 9% from last year, helped by increased production of 3.240 billion bushels.

The increase in plantings will be outside the Cornbelt, with a national trend yield of 42.6 bushels per acre. Domestic use will be 1.848 billion bushels, up nearly 2% from last year. While the soybean crush is forecast at 1.675 billion, it is driven by anticipation of high meal exports replacing the drought-induced shortfall from Argentina.

While meal will see more demand, consumption of soybean oil will drop slightly as biodiesel demand levels off. 2009 will bring the fifth consecutive year in which soybean oil has declined in the amount used in the food industry. Soybean exports will grow to 1.225 billion bushels, due to increased share of global oilseed trade and lower supplies available from South America.

China will control the international demand, taking half of world trade. Ending stocks are forecast at 380 million, up 80% from the current estimate, pushing stocks to use ratio to 12% and the national average farm price down to $8 per bushel, compared to the $9.25 current year projection.

Wheat acres will be down because of a 4.2 million acre drop in winter wheat, and a 2.9 million acre drop in soft red winter wheat. In the northern Plains, spring wheat area is expected to decline with increased soybean plantings. The national average yield is expected to be 43 bu. per acre. Current crop conditions in the Southern Plains are less favorable than a year ago.

Crop conditions in the Central Plains are better than last year. Conditions for the Midwestern soft red winter wheat crop are generally favorable. Wheat supplies are expected to rebuild from last year’s 60 year low. Domestic use will be up slightly to 955 million bu. due to the population growth.

Exports are expected to decline 5% to 950 million bu. due to surpluses in competing countries. World production will decline from the 2008 record. Ending stocks are projected at 664 million, up 9 million, and a stocks to use ratio of 30%. The average farm price is projected at $5.15, down $1.65 from last year.

Summary:
USDA’s forecast for corn is steady acreage from the current year due to less profitability, despite increased ethanol use. Feed and export demand will both be lower, as will the average price based on higher stocks. The USDA soybean forecast is for increased acres, more exports, and a higher ending stock projection that will push down the average price. Wheat acres have declined due to more global competition as well as soybeans taking some wheat acreage. Both domestic and foreign use will decline, pushing down the season average price.

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