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The acreage battle is on

Agriculture.com Staff 01/11/2008 @ 9:54am

Two hours before the opening bell rang over the CBOT trading floor, USDA on Friday lit the fuse on what could be the most volatile marketing year ever for corn, soybeans and wheat. At the same time, Friday's crop production and grain stocks reports added fuel to the fire already burning in the battle for acres in key crop areas of the U.S.

Corn stocks numbers came in well below what the market anticipated. Corn stored in all positions was pegged at 10.3 billion bushels. While this is up 15% from a year ago, it's considerably lower than what MF Global vice president Rich Feltes expected, and it could carry with it huge market implications.

"A year ago, corn stocks were 180 million bushels below what the trade expected, and the market added 43 cents per bushel," he said Friday morning. "Today, we're 280 million bushels below expectations. We could quite easily limit up on corn today."

The market's reaction to these numbers could have mammoth implications to not just the corn marketplace, but other industries woven closely by their reliance upon corn, namely livestock and ethanol. It could force some tough decisions down the road.

"The implications of this will throw the cattle and hog industries -- which are already in the red -- deeper into the red," Feltes said. "We're going to have to take the corn markets up to a price level that chokes off ethanol use this year.

"USDA will have to make some tough decisions whether it's going to be the U.S. Department of Ethanol or U.S. Department of Agriculture in how it looks out for other interests."

Two hours before the opening bell rang over the CBOT trading floor, USDA on Friday lit the fuse on what could be the most volatile marketing year ever for corn, soybeans and wheat. At the same time, Friday's crop production and grain stocks reports added fuel to the fire already burning in the battle for acres in key crop areas of the U.S.

Total soybean production for 2007 was down 19% from the previous year at 2.59 billion bushels, according to Friday's Annual Crop Production report. This translated to 14% fewer soybean stocks overall.

Wheat acres are up for 2008, but not as much as analysts expected. In Friday's Winter Wheat Seedings report, USDA pegged all winter wheat for '08 at 46.7 million acres, up four percent from last year. Hard Red Winter wheat seedings, however, are actually pegged one percent lower for '08 at 32.5 million acres, while Soft Red Winter and White Winter are both projected higher, at 21% and seven percent, respectively. Durum acreage is pegged 70% higher at 280,000 acres.

While analysts and market-watchers agree Friday's reports set the stage for a volatile 2008 in the corn, soybean and wheat markets, there will be other factors in play that cause a bumpy ride. First off, Feltes says the ongoing La Niña weather pattern will continue to pressure growing conditions in South America, particularly in the next few weeks, the most crucial time of the growing season for corn and soybean crops there. The battle for acres in the U.S. this spring will have a lot to do with how La Niña treats South American farmers.

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