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USDA: Corn, soybean production up slightly

By ANN HINCH
Assistant Editor

WASHINGTON, D.C. — Corn and soybean yields were projected slightly higher this month in the USDA’s Crop Production report than in September. The report was released on Oct. 10, just one day after a near-historic drop in the Dow Jones Industrial Average, and in the midst of what Brian Hoops called a “massive sell-off” worldwide.

“The financial world is pretty much in turmoil with stocks across Europe and Asia this morning,” he said last Friday.

Hoops, president and senior market analyst for Midwest Market Solutions of South Dakota, noted the good news that this year’s projected U.S. corn crop is set to reflect the second largest yield average on record, behind 2004. The USDA is forecasting 12.2 billion bushels at a nationwide yield of 154 bushels per acre, which is up almost two bushels from September’s estimate. (End production, however, is forecast 7 percent below 2007.)

In soybeans, the USDA is projecting an increase of 2 percent over September’s estimate, at a national yield of 39.5 bushels per acre; though this is down half a bushel from the September report, overall production is forecast at 2.98 billion bushels for 2008. This production is up 11 percent from 2007.

On Oct. 8, Dan Basse, agricultural analyst and president of AgResources Co. of Chicago, speculated corn production would come in at 11.8 billion-11.9 billion bushels for 2008, but that the Oct. 10 USDA report might reflect more. He estimated soybeans at 2.89 billion-2.94 billion bushels.

He speculated corn yield would not be much changed and that soybean yield might even drop to 39.5 bushels per acre, because soybean seed sizes are small and pod weights are down, especially in parts of Ohio and Indiana that did not receive much rain this summer.

Though growers worried about an early freeze damaging late-maturing crops this fall, Hoops joked that his father, a farmer, commented that maybe a freeze would help his soybean harvesting by stiffening the stalks upright and making them easier to cut from the fields.

Ending grain stocks
Hoops said overall, soybean production is higher than traders estimated, helping raise projected end stocks in the USDA’s World Agricultural Supply and Demand Estimates October report. U.S. ending stocks are projected at 220 million bushels, up 85 million over September.

“That gives us a lot more breathing room going through this winter and into next year,” he added.

The estimate for U.S. ending stocks of corn is up 136 million bushels over September, at more than 1.15 billion bushels – most of this owes to the extra 128 million found in higher yields between the September and October USDA reports. But, Hoops said, the U.S. can still use domestically more than it produces (livestock feed expectation is up sharply this month, for example, based on lower grain prices and larger-than-expected supplies).

He added that northern Illinois and northern Iowa are seeing better-than-thought corn yields, while things aren’t as rosy in central and southern Iowa, northern Missouri and parts of Minnesota.

Basse said even with higher projected corn stocks, the U.S. will not have much of a cushion. He estimated that approximately 80 percent of this year’s American corn crop is genetically modified (GMO). The introduction of GMO seed in 1996 is generally regarded as akin to the introduction of hybrid seed in 1953 – so, Basse did a comparison of the first 13 years of hybridization to the first 13 years of GMO seed use.

What he found was that from 1953-65, hybrid seed gave American farmers an average 4.7 percent increase annually in corn yield. GMO seed, on the other hand, has given only a 2.5 percent yearly yield boost. He speculated that for GMO to have the same effect as hybridization, for example, the average yield this year ought to be closer to 164 bushels per acre instead of 154.

 On the other hand, GMO seed has given farmers better yield consistency. From 1973-98, he pointed out the “tremendous variation” in U.S. corn yields because of weather and hybrid genetics; since 1998, Basse credited GMO seed with narrowing that variation with more stability.

The ethanol factor
As of Oct. 1, the USDA projected using 100 fewer million bushels of corn for ethanol based on decreased gasoline consumption. The federal government, however, has yearly mandates for ever-increasing ethanol usage at least until 2022; based on this year’s projected ending stocks, Basse said the U.S. needs to plant 93 million-95 million acres next year to meet its 2009 ethanol mandate.

Both Hoops and Basse pointed out the mandate could be changed at some point, depending on which political party is in power in any given year. Basse added for next year it may also rest on a June 2009 report from the National Academy of Sciences about the relationship of food and fuel to inflation.

Both said the mandates could depend heavily on the Nov. 4 national elections; Basse added the Democrat platform favors biofuel support, while the Republican platform favors considering easing off subsidies for biofuel imports and the blender’s credit.
“U.S. farmers have a real dilemma,” he observed.

“They always like to vote Republican … and this year their hearts are being torn by (the Republican) stance of being less than pro-ethanol.”

Basse said on the bright side for growers, the 9 billion gallons of ethanol used in the American gasoline supply this year represents 31 percent of the

U.S. corn crop and 4.5 percent of
total gasoline demand – if ethanol
wasn’t used, that fuel would have
to come from elsewhere.
“At least from my perspective, we are now in stage two of ethanol,” he said.

“In other words, the plants are built, they’re up and running; they’re not going to come out of production anytime soon unless the market forces that to occur.”

For the long-term, his company has not pared back its estimate of ethanol production in the United States.

10/15/2008