When USDA released its January 12 Crop Production report, that was the final estimate for the 2006 corn and soybean crops. The numbers were bullish for corn. Soybean and wheat prices also rose sharply.
Not only did USDA reduce its estimate of 2006 U.S. corn production by over 200-million bushels from it's previous estimate issued in November, it also reduced its estimate of global and domestic ending stocks. Don Roose, an analyst with U.S. Commodities in West Des Moines, Iowa, says U.S. corn ending stocks of 752 million bushels is exceptionally bullish.
"That carryout for next August 31, which is the end of the 2006-2007 corn marketing year, is very similar to 1995-1996, when corn prices exploded to the upside," he says. Corn prices topped $5 a bushel on the futures market during that historic rally.
Signal to plant more corn acres
Alan Brugler of Brugler Marketing and Management in Omaha, Neb., says the "squeaky tight" domestic ending stocks for corn, when combined with the expected demand for corn from ethanol, exports and livestock feeding, means the market must more aggressively buy corn acres.
"By reducing the carryout down that far, you put a real squeeze on ending stocks for next year," he says. "You basically require 87 to 88 million acres of plantings and you require 153 to 155 bushel per acre as a national average yield. Or you will run out of corn. So the market is sending a signal to plant more corn acres."
The signal to plant more corn acres is the key factor that's keeping soybean prices as high as they are. The USDA January 12 Crop Report estimated U.S. soybean production at 3.19 billion bushels for 2006. That's a little smaller crop than USDA projected in November, but it is still the largest U.S. soybean harvest on record. USDA also estimates the global soybean supplies are big.
"It's the acreage war of 2007," says Brugler. "Corn wants more acres. This will heighten interest in USDA's spring planting intentions report. USDA releases that estimate, based on survey results, at the end of March."
Iowa is #1 in both corn and soybeans
Based on the final estimates for 2006 released by USDA on January 12, Iowa is No. 1 in corn and soybean production, edging out Illinois. Iowa farmers produced nearly 2.1 billion bushels of corn, just less than 20% of the nation's total harvest. Iowa's 2006-corn production was down from the 2.2 billion bushels it produced in 2005. The average Iowa corn yield slipped to 166 bushels per acre last year, down from 173 bushels per acre in 2005.
Iowa's 2006-soybean harvest totaled 510 million bushels, 16% of U.S. production. That's down from the state's 2005 record crop of 525 million bushels.
High corn and bean prices have made it more expensive to feed livestock. But the drop-off in feed use is being more than offset by the export demand for U.S. corn that is coming from foreign markets.
U.S. produced less corn in 2006 vs. 2005
Overall, the 2006 U.S. corn crop came in at 10.5 billion bushels, says USDA, slightly less than the previous official forecast of 10.7 billion bushels. Yields were 2.1 bushels less per acre, and the area planted and harvested was slightly smaller than USDA previously estimated.
In USDA's supply-demand projections released January 12, the amount of corn used for ethanol, forecast at 2.15 billion bushels, was unchanged from the previous month. Exports are forecast to claim 2.25 billion bushels of the 2006 U.S. corn crop, up from the previous month's forecast of 2.2 billion bushels.
The 2006 U.S. soybean crop is estimated at 3.18 billion bushels, down less than 1% from the previous USDA projection, and up from the 3.06 billion bushel crop harvested in 2005.