For corn, the USDA now projects 2010-2011 marketing year consumption at 13.43 billion bushels.  That is 364 million bushels, or 2.8%, more than consumed last year, Good says.

At the projected level of consumption, year-ending stocks will total only 745 million bushels, or 5.5% of consumption. Stocks cannot be reduced much below that level and still maintain pipeline supplies, so total consumption cannot substantially exceed the current projection, he says.

“During the first quarter of the marketing year, corn consumption totaled 4.117 billion bushels.  That is 253 million bushels, or 6.5%, more than consumed in the same quarter a year earlier. Use during the remainder of the year will be limited to about 9.313 billion bushels, which is only 111 million bushels, or 1.2%, more than consumed during the same period last year,” he says.

Corn exports from Dec. 1 through Jan. 6 were 21 million bushels (15.4%) larger than during the same period last year. Ethanol use of corn was 55 million bushels (11.6%) larger than during the same period a year ago. Total non-feed use of corn since Dec. 1 was 76 million bushels (13.6%) more than use of a year earlier, he says.

“Depending on the rate of feed and residual use since Dec. 1, it appears that total corn consumption during the rest of the year can exceed that of a year earlier by only about 35 million bushels,” he says.

It appears that soybean prices have increased enough to ration current supplies, but corn prices have not, although the demand for U.S. corn and soybeans will still be influenced by the outcome of South American production. It appears that the Argentine corn crop, and perhaps the soybean crop, could be smaller than the current USDA forecast, further increasing the export demand for both crops, Good says.

“The prospect for both very tight year-ending stocks of corn and soybeans and a continuation of strong demand implies that 2011 crops need to be large. More U.S. acreage of both crops may be needed to meet projected consumption levels at reasonable prices and to start rebuilding domestic stocks to a more acceptable level,” he says.

Good adds that planted acreage of all crops in the U.S. declined by 8.3 million acres from 2008 to 2010. At the same time, acreage enrolled in the Conservation Reserve Program declined by 3.4 million acres.

“These changes suggest that as much as 11.7 million acres of additional crop land (including double-cropped acres) may be available for planting in 2011. Of that total, 3.7 million has already been planted to winter wheat. Double-cropped acreage of soybeans following wheat harvest could increase by 2 million acres, following a similar decline last year. That leaves 6 million acres for additional acreage of spring planted crops in 2011,” he says.

Soybeans may not require any of that acreage due to increased double cropping. Assuming that corn consumption remains near the 13.4-million-bushel level next year, that year-ending stocks need to expand by at least 500 million bushels next year, and that the 2011 average corn yield is near the trend of 159 bu., most of that 6 million acres should be planted to corn, Good says.

“Based on the need to reduce the pace of consumption and to aggressively expand acreage, corn prices likely need to remain high in absolute terms and relative to other crop prices for an extended period,” he says.