|By MEGAN KUHN
CHICAGO, Ill. — With increasing ethanol production and a smaller-than-normal wheat crop, U.S. corn producers may see higher corn prices this year, according to a recent USDA report.
The projected price range for corn is $2.25-$2.65 per bushel, up from $1.95 to $2.05 in 2005/06, the USDA said Friday in its monthly World Agricultural Supply and Demand Estimates (WASDE) report.
The USDA said that the nation’s corn crop is expected to be at 10.55 billion bushels, a 5 percent decrease from last year. However, projected corn use is up 6 percent at 11.6 billion bushels.
“For corn, demand is a strong factor with increased ethanol production,” said Jerry Gidel, broker analyst with North American Risk Management Services, during a teleconference hosted by the Chicago Board of Trade. “Ethanol is now part of any analysis of the market.”
An estimated 2.15 billion bushels of corn will go to ethanol production this year, a 6 percent increase over last year.
“(USDA) tightened up the carryover stock (in corn) more than anticipated,” he added. “To me, the export number sticks out.”
In response to reduced foreign competition and lower global feed-quality wheat supplies, USDA estimates that corn exports will increase 6 percent in 2006-07 to 2.15 billion bushels. With the increase in demand and smaller crop, ending stocks of corn should be about half of last year’s at 1.1 billion bushels.
Other crops ...
Gidel said that the USDA projected winter wheat crop - 1.32 billion bushels - is about 40-50 million bushels lower than trade estimates.
“This doesn’t sound like much but with a small crop it could be an issue,” he said. “If any other of the world’s wheat producers have problems, it could get interesting.”
The 2006-07-price range for wheat is $3.50-4.10 per bushel, up from an estimated $3.42 last year. The report also estimated U.S. soybean production at 3.08 billion bushels, down 6 million bushels from last year. While soybean exports are projected to be at near record levels, ending stocks are still expected to be a record 650 million bushels.
USDA estimates this year’s average soybean price at $5.10-$6.10 per bushel, compared with $5.65 last year.
The report said “despite projected record U.S. soybean stocks, prices are expected to remain firm due to relatively strong corn and soybean oil prices.”
Marketing the crop
In regard to marketing this year’s crop, Don Roose, president and CEO of U.S. Commodities, Inc., said that it is going to be a trader’s market.
“We are seeing corn and soybeans shift from food to fuel,” Roose said. “It’s a new era and it’s not slowing up.”
Commodity Research Analyst Brian Basting agreed with Roose. “This is a great opportunity for farmers,” he said.
Basting of Advanced Trading, Inc., said that farmers have an opportunity to lock in a price floor for their crops, not necessarily a price ceiling.
“(Soybeans) of the three grains are the most burdensome in regards to carryover,” Basting said. “Producers should look at their risk management strategy.”
Roose agreed, “Soybeans are a follower of other grains and the days of $6 beans are limited.”
The complete WASDE report is online at www.usda.gov/oce/commodity/wasde
This farm news was published in the May 17, 2006 issue of Farm World.