Grain report
By Dr. Robert Wisner

Corn
Major determinants of prices for the next few months will be 1) Corn Belt weather; 2) weekly USDA crop progress reports; 3) weekly export shipments; 4) export sales reports; and 5) reports on foreign crop conditions. With the explosive growth in corn demand for ethanol production, a very good U.S. average yield will be needed to avoid demand rationing through higher prices. Look for short-term market rallies if wet weather threatens to delay plantings into late May or early June, or if a dry-weather pattern emerges in July and August. Plan to use a scale-up approach to sell remaining 2006 corn as well as the new crop you need to move at harvest.

Several factors could hold this year’s U.S. average corn yield at least slightly below a trend yield. Part of the increased corn acreage will come from cotton. The average corn yield in the Cotton Belt is nearly 35 bushels below yields in the heart of the Corn Belt. Part will also come from spring wheat, where average corn yields have been almost 50 bushels per acre below the central Corn Belt. And, agronomic research shows a yield drag of 9 to 12 percent for corn following corn versus corn following soybeans. Also, weather in the last 3 years has allowed planting in the heart of the Corn Belt to begin in the second or third week of April.

USDA projections show a 1.05 billion bushel or 50 percent increase in corn processing for ethanol for the marketing year starting this coming Sept. 1. That follows an expected 34 percent increase in corn processing for ethanol in the current marketing year. Industry reports of ethanol plant construction activity suggest the USDA 2007-08 projections may be conservative by 250 to perhaps 400 million bushels. As you consider these projections, keep in mind that for the last 2 years the U.S. has not produced enough corn to meet market demand.

Beans
Like corn, the soybean market will be unusually weather sensitive. Other important influences on prices will include 1) weather conditions for double-cropping after the wheat harvest in the southern part of the Corn Belt, Kansas, and the Mid-South; 2) the USDA June 30 acreage and stocks report; 3) final estimates of South American soybean production; 4) export sales reports; and 5) summer weather. This year’s soybean acreage will be a bit uncertain until after the June 30 report. Higher-than-usual prices will encourage more double cropping than normal if weather permits, although double-crop yields tend to be lower than the U.S. average.

Plan to boost old and new-crop marketings on rallies using a scale-up approach. For old-crop sales, consider contracts for delivery after harvest if you are storing on the farm and have enough storage capacity to hold beans that long. At press time, the large “carry” built into the futures market provided a substantial price incentive to store until at least late fall.

The bean basis by late November or early December also should start to improve. For the new crop, plan to be conservative on marketings unless you see a significant rally above $8 on November futures. Bean supplies almost certainly will tighten further in 2008-09 as the ethanol industry pulls more acres out of soybeans next year.

Reports at press time hinted that crop estimates for Brazilian and Argentine soybeans may increase from USDA’s recent numbers, 57 million tons (2.1 billion bushels) for Brazil and 44 million tons (1.6 billion bushels) for Argentina. In comparison, last year’s record U.S. soybean crop was 3.2 billion bushels. Projected production for these two countries this spring is 16.6 percent above the 2006 U.S. crop. Their combined exports of beans and bean products are expected to be 201 percent of those from the United States.

Wheat
Look for hard and soft wheat prices to be steady to lower for the next several weeks, with accelerating harvest activity in the Southern Plains and prospects for better foreign crops. If you have farm storage, chances are good that prices will recover enough into early November to at least cover storage costs. Odds for profitable off-farm storage are not quite as high, but probably significantly over 50 percent because of ethanol’s tendency to pull acres out of wheat in the fall with the strong corn market.

Acreage of wheat to be harvested was somewhat uncertain as we went to press because of possible ice damage to the crop in several areas. USDA’s May 12 and June 9 crop reports will be important in clarifying yield potential by classes of wheat and acreage being harvested this year.

Domestic demand for hard and soft red winter wheat should increase moderately from a year earlier for the June to August period. That’s the time of tightest corn supplies and the typical seasonal low point for wheat prices. With corn prices at historically high levels, a substantial increase in wheat feeding appears likely this summer. It would not be surprising to see at least 100 to 150 million bushels more wheat being fed than a year ago. That and prospects for a decline in wheat plantings this fall in corn-growing areas from South Dakota to Ohio and Arkansas should help support a post-harvest recovery in prices. The extent of the recovery will depend on soil moisture in important wheat-growing areas at planting time, as well as prospects for the November to January wheat harvest in Australia and South America. Severe drought cut last season’s Australian crop by about 54 percent from the previous year.

Early and very tentative projections indicate it may recover most of last year’s shortfall. Modestly increased production also is anticipated in India and Europe.

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