US Outlook Conference in Brief
- Monday March 3, 2008
This analysis featured in the March 3, 2008 issue of the HGCA's MI Prospects, Volume 10, Issue 18
News coverage of the USDA outlook conference centered on the major commodity supply use and price projections for the major crops, the first for 2008/09. The first official supply and demand projections are made in May.
Summary
USDA Outlook conference presentations forecast average farm prices for wheat, maize and soyabeans during 2008/09 to rise by 5, 15 and 10% respectively. In the case of wheat an increase in output combined with reduced exports is expected to lead to a partial recovery from the extremely tight supply situation this season. For maize the impact of a small reduction in production and another large increase in fuel ethanol use is expected to be only partly offset by lower feed consumption and export. Ending stocks are seen to decline for a fourth year. For soyabeans a recovery in production is expected to result in only a small rise in ending stocks, due to the much lower beginning stocks.
The aggregate area sown to wheat, maize and soyabeans is forecast to increase by 2.5% or 2.2Mha. The additional area comes from land not renewed for the Conservation Reserve Program (CRP) last October, from further reductions in cotton plantings and increased double cropping with wheat and soyabeans.
But most significant pronouncement at the conference was a comment by Agriculture Secretary that demand for renewable fuels is contributing to ‘food affordability problems’. This was justified in the context of ‘energy security’ and made in the context of the need to develop a cellulose ethanol production. It may hint that adjustment to the existing US fuel security programme which was announced in January 2007 may be under considered.
US Wheat
US wheat production is forecast to rise by 13% or 7.2Mt in 2008 to 63.4Mt. This is due to a 6% higher planted area and a 5% anticipated recovery in yield. Soft red winter wheat plantings are seen to account for about 40% of the rise in projected area. The rest is expected to come from spring wheat including durum. Wheat exports are expected to decline by 21%, or 6.8Mt to 25.9Mt, as the forecast higher world wheat production is seen to increase competition. US ending stocks are expected to almost double to 14.6Mt, 18%, or 2.2Mt above last year’s level. Average farm prices are projected to increase by 5% to about $260 /t which would be a record.
US Maize
Maize plantings are projected to decline by 4% (1.5M ha) to 36.4Mha. More area is expected to be sown to soyabeans instead. Soyabean revenue prospects have improved returns and costs of production are lower compared to wheat and maize in drought prone area. The forecast maize area, however, will still be the second largest since 1944. Using the simple upward trend for average yields, a harvest of 325.4Mt is forecast, only 2% (6.7Mt) less than last year’s record crop.
A forecast 22.9Mt or 28% increase in maize use for fuel ethanol production to 111.6Mt is expected to be largely offset by lower feed consumption and exports. Ending stocks are expected to decline by 14% or 5.0Mt to 31.6Mt, the fourth successive year of reduced ending stocks. Average farm prices are projected to increase by 15% to a record $180 /t.
US Soyabeans
Soyabean plantings are expected to recover by 12% (3M ha) to 28.7Mha. This is mainly at the expense of maize and cotton area but also through double cropping after wheat. With a recovery in yields to average levels, output is expected to increase 14% to 80.3Mt. A decline in exports is expected to be partly offset by higher domestic consumption with ending stocks up 6% to 4.6Mt. Average farm prices are forecast to increase 10% to $380 /t.
David Walker 001 780 434 7615
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