Corn acreage could exceed projections
Variety of influences combining to lower demand
A variety of factors, including low oil prices, a higher US dollar and continued hard times in the livestock sector, will have a definite impact on commodity prices and subsequently affect planting intentions for US growers in the coming weeks.
March 27, 2009 By Southeast Farm Press/Delta Farm Press
March 25, 2009 – Low oil prices, an increase in the value of the US dollar and record low numbers for the livestock industry all play key roles in determining what price commodities will trade and subsequently how many acres of which crop growers will plant, according to one industry expert.
Jim Sullivan, senior vice-president of Informa Economics, says the strengthening of the US dollar is likely to drive corn exports down by as much as 35 percent in 2009. This is a primary reason many analysts have lowered corn acreage projections by 10 to 12 percent for 2009.
Continued economic troubles for major ethanol producers is another reason for lowering corn acreage estimates to 82-83 million acres nationwide. Despite the current woes, Sullivan says government mandates for ethanol blending to meet clean air standards will keep demand for ethanol good and likely force continuation of government support for ethanol production.
Speaking at the recent Virginia Soybean and Small Grains Association meeting, Sullivan says a combination of factors lead him to believe corn production in the upper Southeast and nationwide will both be higher than currently projected.
Virtually every corn input is directly tied to oil prices, and he contends oil prices are likely to stabilize over the next two years at $45-50 per barrel. Stability in oil prices will likely mean stability in livestock prices as investors move away from commodities, because of a lack of high profit potential.
Sullivan says for the first time in modern history all four major meat industries; beef, pork, chicken and poultry are in decline in terms of on-farm animal numbers. Broilers took the biggest drop in 2008, down 3.2 percent, followed by swine at 2.6 percent. Turkey and beef numbers both dropped about 1.5 percent last year.
Some analysts believe these numbers are likely to rebound somewhat in 2009, but Sullivan contends the decline is likely to continue into 2010.
In an effort to keep feeding costs in line, many large livestock operations have moved more to soybeans and wheat in their rations. Sullivan says there may be some continuation of switching from corn to wheat and soybean rations. However, stabilized corn prices and continued worldwide demand for soybeans may mean more corn-based rations will be used.
All these factors combined, he says, factor into his projections of more corn than is being projected in 2009. The driving factor for most growers, he says, is continued high prices, compared to pre-2006 levels and the prospect of lower input costs, compared to 2008.
Like it or not, Sullivan says China also will play a role in US grain production in 2009. China’s industrial growth continues to slow and is not expected to reach double digit growth for the next few years. In the fourth quarter of 2008, the Chinese economy grew at only 6.8 percent and at only 9 percent for the year, compared to 13 percent for 2007.
In addition to coping with the same economic challenges that affect the global economy, China is in the midst of revamping its agricultural land use system. More and more farmers are being given control of their land as the Chinese move away from more centralized control.
The end effect of economic and structural changes in China will likely have the most profound impact on cotton growers in the Southeast, but will also have a significant impact on grain crops that are exported to China.
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