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When we review the fundamental picture in the agricul-tural markets, we are constantly reviewing the supply and demand situation to determine the longer-term trends. The supply and demand drives commodity prices, and furthers the decision of what to plant—based on potential profitability. Soybean and wheat production in the U.S. is likely to increase for the 2007-2008 crop year, as a result of significantly higher prices. Longer term, the corn acreage and demand is expected to continue to grow over the years as a result of the large push for ethanol and biofuel production. This would allow the U.S. to become a self-sustaining nation, and reduce its energy dependence from other countries. For the 2007/2008 growing season, the high price of soybeans and wheat relative to corn and cotton only encourages farmers to give a stronger consideration to planting soybeans and wheat over corn and cotton. Keep in mind that a lot can change between harvest time and planting time (over the course of six months), which will continue to add to market volatility for years to come. The Economic Research Service (ERS) through the U.S. Department of Agriculture (USDA) is a great source for following trends (www.ers.usda.gov).The acreage war is continually heating up as demand for corn, wheat, soybeans, and cotton continue to grow. Whichever crop is the most profitable and fits into rotation patterns for the farmer will win out. According to the USDA, the U.S. acreage war could be eased somewhat as the land set aside by the Conserva-tion Reserve Program becomes active again. This land is generally considered to be less desirable farmland though, and might not have that great of an effect on total production (as was expected). Advances in plant science also could have an effect on future production. Corn is typically the largest revenue-generating crop in the U.S. Its importance in our economy has continued to grow as new uses are developed. Its primary use has always been feed usage. It is also used in ethanol production, high fructose corn syrup, corn gluten feed, and starch—to name a few. The majority of the corn crop is grown in the “Corn Belt” in the U.S., which stretches from eastern Ohio to central Nebraska—with the highest concentration grown in Iowa and Illinois. The Growing Season:Corn is considered to be one of the more difficult crops to grow. Corn plants are tall and thin, and therefore require a good root structure to support the plant. Top-soil and sub-soil moisture are critical in many stages of development. Therefore, corn can be an expensive crop to grow—due to the costs associated with irrigation. It is important to note that lack of adequate moisture tends to be more common than excessive moisture. Excessive moisture, to a point of standing water in the fields after planting, can also be detrimental to the final yield. The planting season takes place in the U.S. from late April through early June. Many believe that the odds of producing good yields increase if the corn crop is planted by mid-May, because the plant is especially vulnerable to yield loss if it is exposed to extreme heat and dryness during tasselling and pollination—which occurs from mid-July through mid-August. Improved seed quality and faster varieties might be limiting the risk of yield loss, if the crop is planted during late May through early June. The kernels develop during the pollination period, so the mid-July through early August time frame is con-sidered the most critical period of the growing season. The number of kernels developed has the biggest impact on the final yield. Excessive heat and lack of moisture would be considered bullish this time of year for the corn market. By late August to early September, very little can affect the final yield outcome. Some of the risks associated with late yield reduction include early frost, root rot, root worm, and beetles. Supply and Demand:The primary factors currently affecting the supply and demand situation include the push for ethanol, a weakening dollar, and renewed strength in emerging markets.
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