| USDA jumps corn estimate above 13.3 billion bushels
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| By ANN HINCH
Assistant Editor
WASHINGTON, D.C. — A dry summer hasn’t diminished USDA’s expectations for the volume of corn to be harvested across the United States. In fact, if its updated Sept. 12 estimate holds true, it will be a hallmark of biological engineering over nature.
“The genetic modifications on corn are working,” said Ray Huckabay, executive vice president of Linn Group, a commodities trading firm in Chicago, who also spoke with Farm World following USDA’s August estimate report.
USDA is predicting a rise of more than 250 million bushels of corn over its estimate of just a month ago of 13.054 billion bushels, to put the new estimate just over 13.3 billion. This is due to an increased expectation of yield, nearly 156 bu./acre instead of the nearly 153 forecast in August.
Huckabay suggests there are those who believe October’s USDA report will project yet another increase in harvest. Despite USDA prediction of a decrease in demand for ethanol corn, Huckabay is convinced none of the crop will go to waste. For one, he believes the demand for livestock feed is greater than USDA’s estimates, citing a record number of hogs and poultry, mostly turkeys.
He cited the European Union (EU) buying up non-genetically modified (GMO) grains from other countries. “Everybody that’s got non-GMO corn or sorghum or barley is selling it,” Huckabay said, explaining this is why Brazilian corn is trading for $2.50 more per bushel than American corn.
As a result, he forecast that countries selling grains to the EU will be buying American corn as replacement, since they’re not as stringent about GMOs. He expects the U.S. may be exporting 60 million to 80 million bushels of corn each week for the next month, mostly to Asia, though Canada should also be a big grains buyer.
“I tell people, ‘You can be bearish on corn if you want, but (buyers are) going to use everything (American farmers) grow,’” he said.
USDA projects lower demand of corn for ethanol in its September World Agricultural Supply and Demand Estimates report, by 100 million bushels, while raising its “feed and residual use” estimate by the same number (it also raised its export estimate by 100 million bushels). The reason for its lower ethanol estimate is based on “indications of declining plant capacity utilization and a slower-than-expected pace of start-ups.”
Huckabay isn’t sure. He said ethanol prices are currently less than petroleum gasoline – combine that with blenders’ federal tax credit, and ethanol is the cheaper per gallon by nearly $1. If the price stays down and encourages usage, he expects the so-called “blend wall” will dissipate and corn demand could stay up.
In the Farm World area, all states except Kentucky saw an increase in estimated corn production between Aug. 10 and Sept. 12. In particular, Indiana, Illinois, Ohio and Iowa each saw an increased estimate of between 20 million and 30 million bushels. Even drought-stricken Tennessee saw a jump of nearly four million bushels.
Soybean, wheat prices up
As for soybeans, USDA dropped its estimate only a fraction, but Huckabay expects that will decrease further by mid-October. He said there have been double-crop bean losses in the mid-South because the plants didn’t have time to establish deep enough roots before drought did its damage.
Also, in the four joining corners of Minnesota, Wisconsin, Iowa and Illinois, he said the region received at various points between 13-24 inches of rain very quickly not long ago. “Beans that stood in water for just two days, the roots just died,” he explained.
Despite all this and “disappointing” projected soybean yields, Huckabay isn’t ready to throw in the towel and cut harvest just yet. Further, he believes soybeans and wheat may “steal” cotton and even corn acres next year because of current record prices for the two – wheat is upwards of $9 per bushel and could possibly go higher because of worldwide demand – and because they’re cheaper to grow than corn.
If that happens, corn prices “can’t” go down because of less being grown, he said, and he would not be surprised to see $5 corn next year and even $10 soybeans (though if there is a surplus of wheat, that price could decrease). He predicts the consumer would see the cost passed along initially in the meat case, with prices rising 10-15 percent next year. It could move to grain items after that.
“We’re going to start eating oatmeal, because Wheaties are too expensive,” he half-joked, adding the sobering observation, however, that “there are areas in the world that have riots over food prices.”
One drawback to a near-record crop is storage. Farmers are going to face challenges storing their harvested crop and transporting it, Huckabay said, as facilities may “bottleneck” if supply exceeds storage and immediate shipping capacity. This could lead to later harvesting in some cases, which may affect the quality of crop left in the fields.
This farm news was published in the Sept. 19, 2007 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee. |
| 9/19/2007 |
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