Reductions in corn and wheat supplies should bring an improvement in prices for those commodities in the 2001/02 marketing year, according to Philip Sronce, director of the Grains and Oilseeds Analysis Group of USDAís Farm Service Agency.
“Even though wheat use will decline moderately, lower supplies will reduce supplies,” he says. “For corn, slightly larger use will combine with lower supplies to reduce ending stocks.”
The price for wheat is projected at an average $2.85 per bushel, he said at the annual Agricultural Outlook Conference in Washington. That would a 20 cent increase over last year. For corn, the price is expected to be $1.95 per bushel, up from 1.80 last year.
Significant acreage shifts have been occurring between wheat, corn, and soybean in the 1996-2000 period, Sronce points out, following enactment of the 1996 farm bill.
“Soybean acreage has increased from 64.2 million acres in 1996 to a record 74.5 million acres in 2000, while wheat decreased from 75.1 million acres to 62.5 million. Corn acreage has been relatively stable, without a discernable trend, ranging between 77.4 million acres to 80.2 million acres.”
The 2001 planted acres forecast for corn, at 78 million, is 1.6 million below last year. “Many analysts believe nearly ideal planting conditions were responsible for up to half of the 2.2 million acre increase in corn last year,” Sronce says. “Assuming normal weather, much of this “extra” acreage will likely not go into corn this spring. Attractive soybean loan rates and lower fertilizer requirements for other crops will account for the rest of the expected decline in plantings.î
Less fall-planted wheat, higher fertilizer prices, planting flexibility, and the benefits of the soybean marketing loan program are expected to provide growers with incentives to further expand soybean acreages at the expense of corn and wheat.
“Mitigating factors to the soybean acreage expansion are the limited availability of quality seed and the longer term benefits of maintaining crop rotations.”
“Mitigating factors to the soybean acreage expansion are the limited availability of quality seed and the longer term benefits of maintaining crop rotations,” Sronce says.
Winter wheat plantings dropped 2 million acres last year to the lowest level since 1971, due primarily to prolonged drought over much of the production region, followed by cold, wet weather that kept some Plains producers from planting.
Considerable uncertainty exists over how much will be harvested from the current winter wheat crop, he notes, with the current forecast of 52.5 million harvested acres the lowest since 1972. Assuming an average yield of 40.5 bushels, production of 2,125 million bushels would be down 98 million from last year.
“The lower production, combined with lower beginning stocks, will result in 2001/02 supplies declining a bit more than 200 million bushels from the previous year,î Sronce says.
Domestic use is expected to drop about 11 million bushels and stiff competition is likely to cut U.S. wheat exports to 1,025 million bushels. China is ìa big question markî in terms of how much wheat they will import and what level of stocks they hold. ìNo one knows,î he says.
“The crucial question for the price outlook is whether this will be the year that the world market tightens enough to push up prices. A significant decline in stocks over the last two years increased the marketís vulnerability to shocks, but production problems around the world were too limited to strengthen prices. The 2001/02 trade year will open with relatively low carryin stocks and the outlook is for some decline in world wheat area.î
U.S. corn growers are expected to plant 78 million acres this year, down from last year's 79.6 million, Sronce says. Production from 71.2 million harvested acres is projected at 9,675 million bushels, which would push total supplies to 11,576 million bushels, one percent below 2000.
“Concerns at this time center more on input costs and fertilizer availability than on weather, although the focus on weather will increase as we approach and go through the planting season. The number one issue for 2001 is how growers will deal with higher nitrogen prices and possible shortages.
“Many Corn Belt agronomists have said that some reduction in application rates may have little impact on yields due to overuse in the past. Also, more producers have integrated soybeans into their crop rotations and may not be fully taking into account the effect of nitrogen carryover from the beans.
“Higher prices this year will likely promote more precise application rates through soil testing and increased sidedressing. However, high fuel prices will raise the cost of additional passes through the fields, so this option may not be an automatic choice.”
Increased hog/poultry production are expected to keep corn feed use strong, while a 4 percent drop in beef production will see less feed use there.
A “generally favorable” global feed grain demand “suggests continued increases in meat and poultry consumption,” strengthening demand for corn and other feedstuffs, Sronce says. A modest increase of 50 million bushels in U.S. corn exports is forecast.
Ending stocks are forecast at 1,636 million bushels, a drawdown of 255 million bushels and the lowest level since 1997/98. The ending stocks-to-use ratio of 16.5 percent is below the 2000/01 estimate of 19.3 percent.
If dry conditions develop prior to and during the pollination period, corn prices could increase significantly above the forecast level, Sronce says.
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