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The irony of the USDA Acreage Report

Agriculture.com Staff 07/06/2007 @ 12:26pm

A big increase in corn and an even larger decrease in soybean acres caught the market off guard, as last Friday's USDA figures were outside the range of estimates.

Corn acreage for 2007 is estimated at 92.9 million. This is a 2.3 million increase above the pre-report estimate, and compared to last year's 78.32 million, nearly 15 million acres more. Soybeans, on the other hand, saw a decrease of 5.5% from the pre-report estimate with the Friday figure coming in at 64.08 million, which compares to last year's 75.52 million. Wheat acres for all wheat came in at 60.5 million versus the 2006 figure at 57.4 million.

With bean prices trading over $9 on November 2008 futures, and wheat prices for 2008 trading near the 5.50 mark in Chicago and Kansas City, it is likely that corn needs to fight for acreage in the year ahead. As of the 4th of July, corn prices plummeted on acreage figures and expectations for a large crop. Many corn producers we have recently visited with, that have increased corn acreage this year, suggested they would like to and will probably move back to their historical crop rotation, planting more beans and possibly wheat for next year. That is, unless corn futures rally enough to keep them actively planting corn in 2008.

In summary, if wheat and bean prices provide incentive for farmers to change to a rotation of less corn, it will also take a rally in December 2008 corn futures to keep corn production high, especially to meet growing U.S. and world demand. So, in the long run, a bullish acreage report for soybeans this year suggests a rally for corn prices by winter of 2008.

If you have any questions or comments, please contact Top Farmer at 1-800-TOP- FARM, ext. 129.

A big increase in corn and an even larger decrease in soybean acres caught the market off guard, as last Friday's USDA figures were outside the range of estimates.

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