USDA Sees Corn Carryout Falling

USDA sees U.S. corn ending stocks dropping 28% in 2006-07 due to smaller plantings and stronger usage for ethanol and exports. However, the U.S. soybean stockpile is expected to rise slightly from this year’s record level despite a strong rebound in U.S. exports.

U.S. corn and soybean exports should face less competition in the next marketing year, while U.S. hard wheat will face more challenges from Canada and Australia, USDA said on Feb. 17 at its annual Outlook Forum.

The use of corn to make ethanol will rise 34% and the devastating soybean rust fungus should not be a major problem for U.S. growers, USDA says.

U.S. corn exports are seen hitting 2 billion bushels in the marketing year starting Sept. 1, up 150 million bushels from the current 2005-06 projection.

Reduced export competition, especially from Argentina where production is down due to lower plantings and a drought, is expected to boost U.S. market share.

Domestically, corn used to make crop-based ethanol fuel is expected to jump to 2.15 billion bushels from 1.6 billion bushels forecast for this marketing year. As a result, the average cash price for corn is expected to rise to $2.15/bu. from an estimated $1.90 this marketing year, USDA says.

"Corn yields are likely to determine how much prices increase," says Ed Allen, international grains analyst for USDA's Economic Research Service.

USDA doesn’t foresee China's long-awaited switch to a net corn importer in 2006 because of its own large corn crops the last two years.

The U.S., the world's largest corn producer and exporter, has harvested back-to-back bumper crops and is expected to produce its fourth-largest corn crop this fall.

U.S. soy exports are expected to rise 18% to 1.08 billion bushels due to lower prices from record supplies. This marketing year, U.S. soy exports are expected to be 910 million bushels – the lowest level since 2003-04.

Because U.S. soy sales are lagging, Brazil is expected to surpass the U.S. as the world's leading soy exporter this year.

USDA bumped its forecast for soybean ending stocks to 560 million bushels – an all-time high and more than double 2004-05 levels. Several analysts expected ending stocks to be as high as 600 million bushels.

A widespread outbreak of soybean rust in the Midwest seems unlikely after the disease failed to become a serious threat in 2005, USDA says.

Domestic soyoil use is projected to rise 2% but growth is limited by transfat labeling laws that are causing some food processors to switch to other vegetable oils.

The use of soyoil for biodiesel production is still growing, but from a very small base. Biodiesel works in any diesel engine and is a clean-burning fuel derived from any fat or vegetable oil.

Editors note: Richard Brock, The Corn and Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.

To see more market perspectives, visit Brock's Web site at www.brockreport.com.