The Wall Street Journal-20080213-Corn-Yield Expectations Rise- While Acreage Is Seen Falling

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Corn-Yield Expectations Rise, While Acreage Is Seen Falling

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The U.S. Department of Agriculture is predicting that farmers will plant 88 million acres of corn this year -- a drop from the 93.6 million planted in 2007 -- but then they are expected to bring acreage back up above the 90-million-acre mark for the next several years.

The long-term "baseline" forecast released by the USDA yesterday sees planted-corn acreage rising back to 91 million acres in 2009 and then 93 million acres in 2010. The forecast for 2017, the last year included in the baseline projection, is for 92 million acres.

The report had little impact on corn prices, which fell as weakness was seen in several commodity markets. Chicago Board of Trade nearby March corn fell 5.75 cents to $4.97 a bushel.

Unlike corn, a lot more wheat and soybeans are expected to be planted this year thanks to record-breaking future prices for crops planted in 2007.

Farmers aren't just switching corn acres to wheat and soybeans. They are putting fallow or pasture land into wheat and soybean production in states like Kansas and Texas to take advantage of strong prices, USDA economist David Stallings said.

There were 246.5 million acres of corn, soybeans, wheat, rice, cotton, sorghum, barley and oats last year. That overall figure is forecast to reach 252.6 million acres in 2008 but then fall off over following years.

"We expect wheat prices to come back down," Mr. Stallings said.

Unlike the forecasts for corn acreage, the expectations for corn yields do nothing but increase. The USDA baseline shows farmers getting an average of 155.3 bushels per acre this year, then rising to 157.3 bushels in 2009 and 159.3 bushels in 2010. The forecast is for 173.3 bushels per acre by 2017.

Rising corn yields are essential for ethanol production to increase in the U.S. because refiners rely almost solely on the crop for fuel. More and more of the crop will be going to the government-subsidized alternative fuel over the coming years, according to the USDA report that was finished in November as a basis for its annual budget.

"Ethanol production in the United States has increased rapidly over the past several years, from less than 3 billion gallons in 2003 to over 6 billion gallons in 2007," the report said. "Expansion in the industry is projected to continue, particularly over the next few years, exceeding 12 billion gallons by 2010."

But the forecast is dated in that it doesn't take into account the energy bill recently passed by Congress, which mandates the production of 15 billion gallons of corn-based ethanol annually by 2015.

Ethanol refiners are estimated to have to use about 5.8 billion bushels of corn to produce that much fuel.

In other commodity markets:

CRUDE OIL: Futures finished lower ahead of a report slated for release today expected to show that U.S. petroleum stockpiles increased last week. Rising inventories are a possible sign that demand is weakening. Light, sweet crude oil for March delivery settled 81 cents, or 0.9%, lower at $92.78 a barrel on the New York Mercantile Exchange.

NATURAL GAS: Futures ended down after a session marked by choppy trading. Natural gas for March delivery settled 9.5 cents, or 1.1%, lower at $8.436 a million British thermal units on the Nymex.