Wisconsin’s Corn, Soybean Forecasts Both Cut Four Bushels From Last Month

By Jane Fyksen Crops Editor
Thursday, September 18, 2008 7:39 AM CDT

Corn and soybean yield forecasts for Wisconsin are lower than last month. Based on conditions Sept. 1, Wisconsin’s state-average corn yield is now forecast at 137 bushels; that’s a 4-bushel drop from last month. The state’s Sept. 1 forecast for soybeans is 38 bushels, also down 4 bushels from last month.

Even with the USDA’s recent cut in national corn and soybean production forecasts, price prospects are far from settled, reports University of Illinois Market Analyst Darrel Good. "Changes in U.S. and world production prospects, energy prices and world economic conditions will continue to influence prices," states Good, adding that a further drop in U.S. corn and soybean production forecasts is expected in October.

"It is also encouraging that prices are holding up well in the face of poor economic news and declining crude oil prices," he adds, commenting on USDA’s September forecasts of the prospective size of the 2008 U.S. corn and soybean crops, released late last week.

As anticipated, both were smaller than the August forecasts. Outside the U.S., both wheat and soybean production prospects increased while prospects for corn deteriorated slightly.

The 2008 U.S. corn crop is now forecast at 12.072 billion bushels, 216 smaller than the August forecast. The national average yield is forecast at just over 152 bushels, compared to 155 bushels last month. Total production is expected to decrease 8 percent at the national level. If realized, U.S. yield will be the second highest on record, behind 2004. Production will be the second largest, behind last year.

"The decline reflected a dry August in many areas and was well reflected in the weekly crop condition ratings," says Good. "The largest declines in average yield prospects occurred in Michigan and Ohio, 8 bushels each. Average yield forecasts were lowered 3 bushels for Iowa and 2 bushels for Indiana, but unchanged for Illinois."

Corn yield forecasts are lower than last month across the northern and eastern Corn Belt and the Ohio and Tennessee Valleys where lack of rainfall during August reduced soil moisture supplies and stressed the crop, reports the Wisconsin Agricultural Statistics Service.

Based on Sept. 1 conditions, corn production in Wisconsin is expected to be 404 million bushels n off 9 percent from 2007.

Wisconsin’s soybean production is expected to hit 61.9 million bushels n a jump of 19 percent over last year. According to the Wisconsin Agricultural Statistics Service, the large increase in production in this state is the result of producers planting more soybeans this year after switching acres to corn in 2007.

U.S. soybean production is projected to hit 2.93 billion bushels, up 13 percent from 2007. If realized, it will be the fourth largest production on record. Nationwide yield is forecast at 40 bushels, off 0.5 from last month.

On the consumption side, the USDA’s World Agricultural Outlook Board lowered the projection of feed and residual use of corn during the current year by 100 million bushels, to 5.2 billion bushels. "That would be the smallest since 1995-96," reports Good. "The year-over-year decline of 850 million bushels - 14 percent - appears large.

He says the small forecast reflects a combination of reduced livestock output, more feeding of distillers grain, reduced feeding rates per animal due to higher feed prices, and smaller residual use due to a smaller crop. Residual use during the 2007-08 marketing year appears to have been quite large, perhaps indicating the 2007 crop was overestimated, he notes.

U.S. corn exports are still expected to decline by 17.5 percent to 2 billion bushels from the record level of 2007-08 despite prospects for a smaller crop and smaller exports for Argentina. World trade of corn is expected to decline by 425 million bushels - 11 percent - due almost entirely to smaller imports by the European Union. Feed use of wheat in the European Union is expected to increase by 485 million bushels from the extremely low level of last year as production there is up by 1.02 billion bushels.

"Even with the sharp drop in feeding and exports of U.S. corn, stocks at the end of the year are expected to be 558 million bushels smaller than stocks at the beginning of the year," says Good. Ethanol use of corn is expected to increase by 1.1 billion bushels or 37 percent. Current ethanol crush margins, however, are under pressure as ethanol prices remain low relative to unleaded gasoline prices, he adds.

"The 2008-09 marketing year average farm price of corn is projected in a range of $5 to $6 compared to $4.20 for the year just ended. The average price reflected by futures prices for the next year is very close to the midpoint of that range,” says Good.

As noted, the 2008 U.S. soybean crop is now estimated at slightly over 2.9 billion bushels, 39 million smaller than the August forecast as the U.S. average yield forecast dropped from 40.5 to 40 bushels per acre. For the 11 objective yield states, the USDA found a relatively low number of pods per 18 square feed compared to the September count in recent years in Illinois and Minnesota.

"For the 29 states for which yield forecasts are made, the forecast dropped in 14 states, increased in seven states, and was unchanged in eight states," reports Good. "The largest decline, 4 bushels, came in Wisconsin. The yield forecast was unchanged for Illinois and Iowa and was reduced 3 bushels for Indiana and Ohio."

On the consumption side, the USDA increased the estimate of soybean exports during the year just ended by 10 million bushels, but lowered the estimate of the domestic crush by 15 million. For the current year, the domestic crush is expected to decline by 30 million bushels and exports are expected to decline by 155 million bushels.

Exports of soybean oil and both domestic use and exports of soybean meal are expected to decline. The decline in exports reflects the extremely tight supplies of U.S. soybeans and will be accommodated by larger exports from both Brazil and Argentina and by a small reduction in Chinese imports.

The 2009 Argentine crop is now forecast at 1.856 billion bushels, nearly 9 percent larger than the 2008 harvest. Production is expected to grow by about 2.5 percent in Brazil.

"Stocks of U.S. soybeans at the end of the current marketing year are projected at a very tight 135 million bushels," Good says.

"The marketing year average price is forecast in a range of $11.60 to $13.10, up from $10.15 for the 2007-008 marketing year,” the Illinois market-watcher reports. "Like corn, futures market prices currently reflect a price near the mid-point of that range."

Even though USDA lowered its forecast for this year’s corn harvest by 2 percent, analysts say even that estimate might be high. The projected harvest of 12.1 billion bushels comes after a wet spring and dry August. The tight supplies are pushing up grain prices and forcing livestock farms to cut back production.

This year’s projected corn harvest would still be the second-largest on record after 2007, but supplies remain scarce. Iowa State University agronomist Roger Elmore says his state needs a normal or later-than-normal frost to squeeze the most possible out of the current crop.

Don Roose, president of U.S. Commodities Inc. in West Des Moines, Iowa, says the ag department is likely to reduce its harvest estimates again next month. “The ground reports we get across the grain belt continue to show a crop that’s not as large as last year,” notes Roose.

The agriculture department lowered its estimate of the soybean harvest by a mere 1 percent this month. Iowa’s estimated yield was unchanged from August, but the estimated yield nationally was lowered a half bushel to. The estimated soybean harvest of 2.9 billion bushels would, as noted, be 13 percent higher than last year.

Iowa’s leading grain marketing specialist is more pessimistic about the state’s corn and soybean production than the federal government after this summer’s record flooding and a poor start to the growing season. Chad Hart of Iowa State University says the days when farmers could predict the market are over, and he cautions to expect the current trend of volatile prices on the Chicago Board of Trade to continue.

“We just don’t have the stores of corn (and soybeans) to maintain the price anymore,” Hart says. “Investors are jumping in and out as a hedge (against other investments), it definitely impacts volatility.”

Hart says producers should insure themselves now. “Don’t be caught without downside protection,” Hart warns.

Economists say higher prices for beef and other meats are on the way after higher commodity prices have forced some livestock producers to cut production.

“There is going to be continued pressure on food prices from the situation we have been in and are still in,” says Keith Collins, a former chief economist for the USDA. “These are very difficult markets.”

It’s also noted that North Dakota farmers are expected to produce more bushels of corn than spring wheat for the second straight year, and only the second time in state history. Before last year, corn bushels had never surpassed spring wheat in North Dakota, according to USDA. This year, the estimated corn production would outpace both spring wheat and durum wheat bushels.

“I believe this is a trend that’s going to continue in corn’s favor,” says Larimore, N.D. farmer Jay Nissen, president of the North Dakota Corn Growers Association. “I think producers are seeing the financial viability of corn versus other crops, especially young producers.”

Corn production has increased tenfold in North Dakota in the past 20 years, but no one believes corn will supplant spring wheat as North Dakota’s staple crop. North Dakota leads the nation in spring wheat production every year, and farmers plant nearly three times as many wheat acres as corn.

As for neighboring Illinois, USDA is leaving expectations unchanged. Illinois corn growers still are expected to produce just more than 2 billion bushels - the same as last month’s forecast. Last year, the Illinois corn harvest of 2.28 million bushels was the state’s largest on record.

Last week’s report represents a turnaround from earlier this summer, when some analysts feared the Midwestern floods in June had devastated the crops and would make already expensive agricultural commodities even pricier. USDA said last month that “nearly ideal” growing weather has helped Midwestern farmers recover.

Commodity traders and agricultural experts say rains from recent hurricanes could throw off the estimates. This month’s report is only the second of the USDA’s reports this year to include actual field visits and farmer surveys, which analysts consider more reliable.

Commodity prices rose in reaction to the report, with corn for December delivery trading 30 cents higher to $5.64 a bushel on the Chicago Board of Trade and soybean futures up 27 cents to $12.03 a bushel.

USDA estimates that will keep end-of-season corn stocks low, at slightly over one billion bushels, much lower than last year’s stockpile of nearly 1.6 billion. The smaller reserve will likely keep corn prices at their current elevated levels, says Joe Victor, vice president for marketing at Allendale Inc., a commodities broker based in McHenry, Ill.

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