Led by unprecedented demand for corn used to produce ethanol, U.S. corn prices at the farm level will average $3.60/bu. in the 2007-08 marketing year, U.S. Department of Agriculture economists said at the department’s Agricultural Outlook Forum March 2. That’s 40 cents above the midpoint of the 2006-07 forecast, and $1.60/bu. higher than in 2005-06.
U.S. soybean prices at the farm level are forecast to average $7.10/bu. in 2007-08, up from the $6.20 midpoint of the 2006-07 projected range. Although U.S. and global soybean stocks are projected to be record large at the start of the 2007-08 marketing year, very strong corn prices, firm vegetable oil prices supported by biodiesel demand, and speculative demand for soybeans are expected to support relatively high soybean prices.
U.S. corn acreage for 2007 is expected to increase 8.7 million acres from 2006. At 87 million acres, corn plantings would be their highest since 1946.
Corn prices rose sharply last fall, topping $3/bu. in futures and cash markets in October. New-crop futures prices have topped $4/bu. in recent weeks as have cash prices in some markets. The projected increase in corn planting is largely expected to result from a shift away from soybean planting, particularly in the Corn Belt where more corn-on-corn plantings are expected. Corn area is also expected to gain from shifts from spring wheat in the Northern Plains and from cotton in the South.
Soybean acreage for 2007 is projected at 70.5 million acres, down 5 million acres from last year’s record.
USDA economists said that for the first time, U.S. ethanol use is expected to exceed exports in 2007-08. Ethanol corn use is projected at 3.2 million bushels, up 49% from the current year projections. At this level, 2007-08 ethanol corn use will account for 26% of total U.S. corn use, up from a projected 18% for 2006-07.
The Renewable Fuels Association (RFA) as of Feb. 12 put existing ethanol production capacity at 5.6 billion gallons annually, but new plant constructions and existing plant expansions will add an additional 6.2 billion gallons, bringing the estimated total production capacity to 11.8 billion gallons. This is up from a combined capacity of 7.8 billion gallons projected last September by RFA. New plant construction start-ups have moved forward at “an amazing pace (more than doubling)” since the beginning of the current marketing year, USDA economists said.