The USDA released encouraging updated projections for the 2008 harvests of corn and soybeans in mid-August. Farmers expect to harvest 79.2 million acres of corn with an anticipated yield of 155 bushels per acre contributing to a near record crop of 12.2 billion bushels. Soybeans will be harvested from 73.3 million acres with an average yield of 40.5 bushels per acre contributing to a crop of 2.9 billion bushels.

Table: Projected 2008 corn and soybean harvest as of August 15

The updated forecast is based on a survey of nearly 30,000 producers during the period July 23-August 6. There has been considerable concern over the magnitude of the 2008 corn crop as the 350,000 acres planted was 7 percent lower than in 2007. Planting was delayed by heavy rains and development was retarded by cool temperatures during March and April.

Table: U.S. corn and soybean production 

Flooding adds to concerns

The situation was exacerbated by prolonged precipitation and flooding in the Upper Mississippi valley and Eastern corn belt through the second week of June. Fortunately warmer weather returned and rainfall was appropriate to crop development.

As of August 3, 66 percent of corn was rated in the good-to-excellent range in the 18 major corn-producing states. The crop is lagging in development in some areas as determined by the attainment of the silking and dough stages respectively. This does create some concern for the possibility of an early frost which would lower yield from the current forecast. Industry commentators have however questioned the validity of the United States Department of Agriculture (USDA) projections which they regard as optimistic.

Favorable prices for soybeans persuaded many farmers to increase the area planted to this crop by almost 18 percent compared to 2007.

Impact on soybean crop

As with corn, sowing of soybeans was impacted by wet and cool weather in April. By the beginning of June, 70 percent of the intended acreage of soybeans had in fact been planted. The situation was complicated further by heavy rains in early June in the upper Mississippi valley.

By August 3, 78 percent of the crop was blooming although this is approximately 10 percent behind normal for the beginning of the month, and only 37 percent of the crop was setting seed compared to the 5-year average for 58 percent.

The delay in planting was reflected in corn spiking to $7.75/bushel on June 14 and again on June 26. The unprecedented rise from $6.00/bushel on May 15 was based on the projected disparity between production and demand including livestock feed, a 32.3 percent diversion of the crop to ethanol production and for export.

Prices decline from peak

Recognizing that the harvest situation was less serious than first envisioned, there has been a 34 percent decline in price from the peak. As of August 7, September and December corn was quoted at $5.22 and $5.42/bushel respectively.

Table: Average monthly prices of corn and soybean meal 2007-2008 

The USDA estimate of the farm price for corn during 2008-2009 will be $4.90 to $5.90/bushel. It is noted that a $1/bushel increase in the price of corn raises the cost of egg production by 6 cents per dozen since escalation in corn generally results in increases in the prices for other grains and also soybeans.

Soybeans down 27 percent

Soybeans declined 27 percent from a peak of $16.27/bushel on June 28 to a low of $11.75/bushel on August 7. The USDA projects the average farm price of soybeans will be $12.00 to $13.50/bushel during 2008-2009. The Decatur price for 48 percent Soybean meal has declined by 32 percent from $380/ton in late July to $350/ton the first week in August.

The reduction in ingredient prices is welcome news to the egg industry which is constantly faced with increased feed costs and until recently, prospects of a short term declining market realization. August values suggest higher margins from beneficial changes in both sides of the equation.