USDA drops corn price forecast 60 cents to $5.40/bushel

The US Department of Agriculture slashed its corn price estimate for the 2008-09 season by 60 cents August 12, forecasting a season-average farm price at $4.90-$5.90/bushel the agency said, as farmers shrugged off the worst flooding in 15 years and are expected to harvest the second-largest US corn crop in history.

"This month's outlook for 2008-09 US feed grains is for higher production and increased domestic use as higher forecast corn production boosts supplies," USDA said in its monthly crops report.

Its first survey-based forecast for 2008 corn production is 12.3 billion bushels, up 573 million from last month's projection based on higher forecast yields and increased harvested area, USDA said.

While the crop will be 6% smaller than last 2007's record of 13.1 billion bushels, it is up 17% from 2006.

Yields per harvested acre will total 155 bushels, up from 148.4 bushels/acre estimated in July and 151 bushels/acre for last 2007's record crop.

"Nearly ideal growing season weather across much of the Corn Belt since late June has supported crop development and increased yield prospects," the agency.

The USDA August 14 said 67% of corn was in good or excellent condition and 63% of soybeans, compared with 56% for both at the same time in 2007. The US will also have higher corn reserves, the USDA said.

"Ending stocks for US corn are projected at 1.1 billion bushels, up 301 million bushels from last month," USDA said in August 12's crops report.

The worst flooding in 15 years, inundating more than 3 million acres in the US Midwest caused a bullish outlook for grains in June, but by the end of that month, USDA had reported that the flooding in the Midwest had not hampered the overall harvest outlook.

Concerns about flooding sent corn prices soaring to a record $7.9925 a bushel in late June and prompted the state of Texas to plead with the federal government to slash the US ethanol mandate from 9 billion gallons to 4.5 billion, citing soaring costs for cattle ranchers.

The USDA also raised by 150 million bushels its 2008-09 forecast of the amount of US-grown corn that will be used for domestic ethanol production to 4.1 billion "as increased supplies and lower prices are expected to improve plant operating margins and capacity utilization rates."

The US will use 3 billion bushels of corn for ethanol for the 2007-2008 season, up from 2.1 billion in the 2006-2007 season.

Larger corn crops mean lower input costs for ethanol producers like Poet LLC, VeraSun Energy and Archer Daniels Midland Co, the three largest US ethanol producers.

"America's farmers have once again responded to adversity, poised to produce the second-largest corn crop in American history," said Bob Dinneen, president of the Renewable Fuels Association, a Washington DC-based trade group of ethanol producers, hailing August 15's production forecast. "Their historic response should go a long way in silencing those Chicken Littles who sought to capitalize on the devastation of this summer's flooding to undermine and abandon America's movement toward cutting our dependence on foreign oil."

The USDA also forecast soybean production at 2.97 billion bushels, up 15% from 2007, but down 7% from the 2006 record.

2008's crop will still be the fourth-largest soybean crop in US history, the USDA said.

Yields are expected to average 40.5 bushels per acre, down 0.7 bushels from 2007, while harvested area is expected to be 17% higher than in 2007.

Soybeans are used primarily for cooking oil and cattle feed but are increasingly used for biodiesel.

The average price for a bushel of soybeans next season will average between $11.50 to $13/bushel, down slightly from its estimate last month of $12-$13.50/bushel in July.

That is up however from 2007's average of $10.15/bushel, for 2007-08, and $6.43/bushel in 2006-07. Soybean prices reached a record $16.3675/bushel on July 3.

Created: August 15, 2008

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