CHICAGO (Dow Jones)--The U.S. Department of Agriculture is expected report a moderate decrease in 2008 corn seedings from 2007 plantings, while analysts will be looking at second-quarter usage to indicate whether high prices have affected U.S. domestic demand as of March 1.
The USDA's reports are scheduled for release Monday at 8:30 a.m. EDT (1230 GMT).
The average estimate of analysts surveyed by Dow Jones Newswires puts corn acreage at 87.387 million acres, down 6.21 million acres from 2007's seedings of 93.6 million. The range of estimates from the 22 analysts surveyed ranged from 85.7 million to 89.75 million acres.
The USDA is expected to report corn stocks at 7.076 billion bushels in its quarterly Grain Stocks report.
The average estimate of the analysts surveyed puts corn usage in the second quarter of the 2007-08 marketing year at around 3.19 billion bushels, bringing stocks down to 7.076 billion bushels. Estimates ranged from 6.950 billion to 7.254 billion. Stocks as of Dec. 1 totaled 10.269 billion.
Acreage
After last year's dramatic 15.3-million-acre jump in U.S. corn plantings, corn area could fall in 2008 due to last winter's high soybean prices, the high cost of inputs and producers' desire to return to previous crop rotations, said Jerry Gidel, an analyst at North America Risk Management Services in Chicago.
The decline in corn acres can be attributed to three factors, the first of which is rotational, said Mike Zuzolo, an analyst at Risk Management Commodities in Lafayette, Ind. The eastern corn belt will probably focus on crop rotation, as the soils east of Illinois need perfect weather to produce yields as good as soybeans. Given the cost and return on soybeans, many east corn-belt producers will return to normal rotations, he said.
The second factor is high fertilizer input costs, and the third is lost acres to spring wheat in the northern Plains, because producers that didn't apply fall nitrogen will look to plant wheat on corn stalks, Zuzolo said.
Meanwhile, Dale Durchholz of Agrivisor in Bloomington, Ill., sees the estimating process as difficult because the market has no precedent for comparison of farmers not having a planting constraint placed on them.
A lot of decisions on plantings were made in the fall, and if producers applied nitrogen in the fall or pre-paid for spring applications, they will plant corn, but a lot of Midwest winter wheat will be double cropped into soybeans, he said.
Said market researchers at Iowa Grain in market report: "Even in the heartland of corn production, such as in the states of Illinois, Iowa and Nebraska, we expect to see some significant shifting away from corn and into soybeans and other crops as farmers there attempt to broaden their production base and rejuvenate soils after repeated corn-on-corn production."
Quarterly Stocks
Strong feed demand, a solid ethanol processing pace coupled with strong export movement is seen to indicate strong usage in the second quarter of the 2007-08 marketing year. Usage during the quarter is estimated at more than 3.19 billion bushels.
Nevertheless, stocks are projected at their highest level since March 1, 1988, with abundant beginning supplies and inventory from the largest harvested crop in U.S. history providing ample nearby supplies.
"Our second-quarter corn stocks estimate implies usage of 3.252 billion bushels, that is a record second-quarter usage," said Joe Victor of Allendale Inc. in McHenry, Ill.
Meanwhile, the stocks report isn't expected to generate any major surprises, with feed and residual use the unknown variable that traders will focus on.
The USDA quarterly stocks report will be scrutinized to see if the recent high prices have affected U.S. domestic demand, Gidel said.
Higher cattle, hog and poultry numbers suggest plentiful demand, Gidel said.
However, "higher distillers dried grain availability, high end-user sourcing last fall, and a significant amount of the U.S. southern harvest moving into feeding and export channels late last summer, which wasn't possibly registered as utilized until the fall quarter, could be factors for a 3.5% drop in winter feed demand versus 2007, Gidel said.
Nevertheless, overall usage is still running 11% ahead of the previous year's pace, though it's still lagging the USDA's projection of a 16% on-year increase in total use, according to Iowa Grain.
Source: Andrew Johnson Jr., Dow Jones Newswires; (312) 347-4604; andrew.johnsonjr@dowjones.com