022508.pdf

The USDA's outlook for 2008 forecasts large year-over-year increases in US crop land acreage and a sizeable increase in the US average corn yield. Despite this, US corn inventories are expected to decline and soybean inventories will remain small by the end of the 2008-09 marketing year. Domestic wheat inventories are expected to nearly double. The average price received by producers for these crops in 2008-09 is expected to be higher than in the current year but lower than current futures prices. Combined planted acreage of corn, soybeans, and wheat is projected at 225 million acres, 7.4 million more than in 2007. The USDA projects US planted acreage of corn to decline by 3.6 million acres and soybeans to increase by 7.4 million acres. If the 2008 US corn yield is closer to the long-term trend, year-ending stocks would decline, and planted acreage of corn needs to be larger than 90 million acres to reduce the risk of a shortage. The market appears to be giving the correct signals for now, favoring corn over soybeans for US spring planting and encouraging more soybean acres in South America from August forward.