By ANN HINCH
Assistant Editor

CHICAGO, Ill. — Oversaturation gave growers in the eastern Corn Belt fits in 2009 – rain holding up planting, slowing crop maturation, and then delaying harvest with the help of snow and ice – but according to the USDA, that didn’t keep U.S. farmers from turning out overflowing volumes of commodities.

Both corn and soybeans trumped their own previous records: corn with 13.15 billion bushels and soybeans with 3.36 billion. Their national yield averages were record-setting too, at 165.2 bushels per acre for corn, nearly 5 bushels higher than the 2004 record, and 44 bushels per acre for soybeans, over 4 bushels higher than last year’s output.

What’s more, U.S. corn stocks as of the end of 2009 were 1.76 billion bushels, the highest since the 2005-06 marketing year, said the USDA’s World Agricultural Supply and Demand Estimates report. Soybean stocks were down to 245 million bushels despite the record harvest, thanks to prodigious exports to China and other foreign markets.

The American farmer can enjoy this news for the next couple of months, but that picture could change depending on the South American soybean harvest, explained Brian Basting, with Advance Trading. By March, Brazil’s and Argentina’s soybean harvest should be apparent, and depending how well their growing season turns out, it could affect U.S. exports.

Basting said the projection is 115 million tons of soybeans from South America, 65 million of which is expected from Brazil alone. Jerry Gidel, North American Risk Management Services, added that he sees U.S. soybean prices dipping to the $9 range with the South American harvest.

But not everybody is expecting a flood of soybeans south of the equator. Erick Erickson, special assistant for planning and evaluation with the U.S. Grains Council (USGC), said a USGC employee in Brazil recently reported he does not expect a “significant increase” in production or exportable volumes of soybeans from that country for at least the next year or two, because of weather unpredictability, coupled with alternative crop production and national policies.

“That doesn’t mean they don’t have future potential, but he just felt in the short-term” that a record-breaking harvest wasn’t going to happen this year, Erickson explained, adding Brazilian exports were high in 2007-08, but last year’s were down and the USGC employee does not expect much change in 2010.

Further, Erickson said there is no indication the Brazilian real (its currency) will be depreciating soon, which means the country’s soybean prices will likely not be dropping on the world market.
There is some lingering worry with field corn harvest, even now. “We’re still going to have some problems getting the rest of this crop into the bin,” said Gidel – as of one month ago, the USDA stated 5 percent of the nation’s corn was still unharvested. This was an average of all states, since the bulk of corn still in the fields was confined to Northern states such as the Dakotas, Wisconsin and Minnesota.

Illinois corn production was actually down from 2008 by about 65 million bushels; the state harvested 100,000 fewer acres in 2009, and per-bushel yield was down from 179 in 2008 to 175 last year. At nearly 2.1 billion bushels, however, it was still the second-highest-producing state, behind Iowa with 2.4 billion bushels and a yield of 182 bushels per acre.

Other Farm World states’ corn production and yields were higher than in 2008, as follows: Indiana, 933.7 million bushels, 171 bushels per acre; Ohio, 546.4 million, 174; Michigan, 310.8 million, 148; Kentucky, 189.8 million, 165; and Tennessee, 87.3 million, 148.

For soybeans, all seven states had higher production than in 2008. Iowa once again led the U.S. with 486 million bushels and 51 bushels per acre yield, followed by Illinois with 430.1 million bushels and a yield of 46. The other states’ production and yields were: Indiana, 266.6 million bushels, 49 bushels per acre; Ohio, 222 million, 49; Michigan, 79.6 million, 40; Tennessee, 68.9 million, 45; and Kentucky, 68.2 million, 48.

Wheat glut

As with corn and soybeans, domestic year-end wheat stocks were also higher than market analysts expected, at 976 million bushels – anticipation prior to the Jan. 12 USDA report was 914 million, according to the CME Group, which operates the Chicago Board of Trade.

This is despite harvesting nearly 300 million fewer bushels of wheat in 2009 than in 2008 (planting this winter is also down by about 6 million acres below analyst expectations, nationwide); Gidel pointed out the U.S. has struggled to export its storage over the past year.

That’s because globally, wheat supplies aren’t hurting, either. “We are not at all threatening the world stocks picture,” said Basting, of lower projected U.S. exports of the grain. In fact, the USDA projects the country’s lowest exports of wheat in nearly 40 years, thanks in part to the availability of Russian wheat, but also lower exports to Mexico and the European Union. Gidel added the U.S. needs to keep a close eye on Eastern European production this year. “About the only way we’re going to get out of this situation is for someone to lose some, somewhere – and hope it’s not us,” he explained.
With respect to corn, his advice to farmers is to scope out marketing opportunities for the next six to 12 months, and to try to sell about one-third of their crop immediately; he forecasts $4.10-$4.15 for new crop prices. The USDA is projecting higher feed and residual use for corn this marketing year, up more than 300 million bushels over last year – and last week’s estimate is up 150 million bushels over what it was anticipating this time last month.

For ethanol, the USDA is projecting an increased use of more than 500 million bushels of corn over the last marketing year. More ethanol means more distillers dried grains with solubles (DDGS).
Part of what the USGC does is find new export markets for DDGS and try to expand existing ones. “More DDGS has to find a home,” Erickson said, adding the USGC’s goal is to double the U.S. export demand for this product over the next four years. He’s not sure if the organization will meet that goal, “but we’ve got a really good start on it … We’ve really tested the doors and windows of every house to see where we can get in.”

As for the possibility of having a second great year in a row, Gidel pointed to 2004 as a high-yield year, at over 160 bushels per acre (again, second only to last year’s average yield) – then reminded people about the following year.

“In 2005, we had a hell of a drought around (the Midwest),” he said. “You never know what Mother Nature is going to do.”

Basting agreed farmers should start being aggressive on 2010 pricing, with high stocks and also considering this year’s input prices are largely down from last year’s. “Risk management is very important for producers,” he said.