October 8, 2008

 

US grain producers are positioned to play a vital role in meeting growing demand amid historically low grain stocks and production problems in some countries, according to agricultural economists from Kansas State University.

 

Global wheat output is up 9 percent this year, and demand is still high although farmers have produced more on higher prices, said Mike Woolverton.

 

For example, Iran recently imported 1 million tonnes of US wheat – its first from the US in more than 25 years -, due to a drought in the Middle East, said Woolverton.

 

Global corn demand is still going strong, which would lower stocks by 3 percent this year, according to Woolverton and colleague Dan O'Brien.

 

O'Brien said grain and oilseed carryover from one year to the next has become less consistent since the US left the grain storage business in the mid-1980s.

 

Compared to the US, countries such as China, India, Brazil and Russia have less arable land, said Woolverton.

 

Much of Brazil's best cropland is far from ports and other transportation routes, which reduced the ability to significantly boost trade with other countries, Woolverton said, adding that it would take years of infrastructure improvement before Brazil could handle large quantities of exports.

 

Demand for US feed grain is expected to remain firm, while ethanol demand has strengthened corn prices though other factors such as economic and income growth in development countries and growing population worldwide has also played important roles, said Woolvertone.

 

Woolverton said ethanol is not taking away all of the US corn, and growth of the ethanol industry will slow down as the business has not been profitable.

 

With the recent price of corn, much of an ethanol plant's profits come from distiller's grains, said Woolverton.

 

In the 2008-09 crop year, the US is projected to use about 33 percent of the corn crop for ethanol, up from 23 percent in 2007-08, Woolverton said, adding that soy stocks are tight and are forecast to remain tight next year.

 

Even though global soy production will rebound this year to near a 'normal' level, the global stocks-to-usage ending ratio will decline for the third year in a row, as production is struggling to keep up with the growth in global demand, according to Woolverton.

 

With the USDA set to release millions of acres of land over the next few years from the Conservation Reserve Programme, US grain producers would be able to expand their acreage if market forces demand it.