With rising prices of other commodities and limited amounts of uncultivated acreage available, it is difficult to see how such an increase can occur. The crop markets have an interesting challenge ahead.

With an increase in winter wheat acreage likely already in place, prices of corn and soybeans in particular may have to remain high relative to alternative crops in order to ensure sufficient acreage in 2008. In addition, average yields will have to remain high to generate sufficient production.

US crop producers have made dramatic shifts in acreage in 2007. Those shifts have been motivated by rising corn-based ethanol production and high corn prices, rising wheat prices, and a surplus of soybeans. The acreage shift was led by a 17 million acre increase in feed grains, including 15.3 million acres of corn. Winter wheat acreage increased by about 3.1 million and harvested acreage of hay was up by nearly one million acres.

Those increases were accommodated by an 11.9 million acre decline in soybean plantings, 1.3 million fewer acres of spring wheat, 4.4 million fewer acres of cotton, and about 900,000 fewer acres devoted to other oilseeds: edible beans, peas, and lentils; and sugar beets.

In addition to the acreage shifts, total planted acreage (harvested acreage of oats and hay) increased by four million acres. The large increase in total acreage likely includes some pasture acreage converted to row crops and perhaps an increase in replanted acreage stemming from the spring freeze that damaged the winter wheat crop.

Prices of corn, soybeans, and wheat remain at very high levels. World and US inventories of wheat and soybeans are expected to decline sharply during the current marketing year. Demand for these crops remains very strong and South America made an insufficient soybean acreage response to high prices.

Low stocks, but will rise

While world wheat acreage has or is likely to increase substantially in 2007 and 2008, the recovery in production is being threatened by weather problems in the United States, Argentina, India, and Pakistan.

Stocks of US corn are expected to increase modestly this year, but stocks in Europe and China are expected to decline sharply. These developments all point to the need for more acreage and production of corn, soybeans, and wheat in the United States in 2008.

USDA projects the consumption of US corn during the current marketing year at 12.69 billion bushels. Usage during the 2008-09 marketing year will likely increase if supplies are adequate. Domestic feed use of corn might decline modestly as the production of distillers grains increases.

US corn exports are expected to remain strong as Chinese exports continue to decline. Some recovery in world wheat production, however, might result in some softness in demand for US corn.

The major uncertainty centres on how rapidly corn-based ethanol production will expand next year. Continued high crude oil prices, a recovery in ethanol prices, additional legislative mandates for biofuels, and ongoing construction of new plants suggest a significant increase in corn used for ethanol.

There may be a market for about 13.6 billion bushels of US corn during the 2008-09 marketing year.

With stocks at the end of the current year at 1.8 billion bushels, the 2008 crop may have to be near 13.1 billion bushels to meet market requirements. A trend yield of 151 bushels would suggest that harvest acreage needs to be near 86.7 million acres in 2008, 600,000 more than harvested in 2007.

Consumption trends

USDA projects consumption of US soybeans during the current marketing year at 2.988 billion bushels. Year-ending stocks are projected at only 185 million bushels, providing no surplus for consumption during the 2008-09 marketing year. With a large soybean crop in South America in 2008 and 2009, exports of US soybeans might decline from the 995 million bushels projected for this year.

Even so, consumption of US soybeans in 2008-09 could be near 2.9 billion bushels. That is 5.4 million acres more than harvested last year.

USDA projects consumption of US wheat during the current marketing year at 2.333 billion bushels. Year-ending stocks are projected at only 280 million bushels, providing little surplus for consumption next year. Use during the 2008-09 marketing year might decline if world wheat production rebounds and US exports decline from the 1.175 billion bushels projected for this year.

Still, a US crop of about 2.2 billion bushels may be needed in 2008. With an average yield of 42 bushels, a crop of that size would require harvested acreage of about 52.4 million, 1.4 million more than harvested this year.