| Updated July, 2008 | |||||
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Grain Balance Sheets
 Soybean Balance Sheet |
The grain balance sheets can be thought of as a commodity counter-part to financial balance sheets that center on the supply and demand for money that is available to a business, an individual, or other institution, and how much will be left after all demands for funds are met. The financial balance sheets focus on assets, liabilities, and net worth. In commodities, the focus is on available supplies, various sources of demand, and carryover stocks that are left at the end of the marketing year after all demands have been met.
With the rapid expansion in the ethanol industry, the profitability of converting corn and soybean oil to biofuels depends heavily on available supplies and other demands for these crops. Impacts of biofuels demand growth on other users of corn and soybeans also depends heavily on this same information. With the expansion in the biofuels industry and with government mandates that call for expanding production of corn-based ethanol as well as biodiesel through 2015, it is important to examine grain balance sheets from a multi-year perspective. A multi-year perspective is shown in our latest balance sheets for corn and soybeans. We will monitor supply/usage conditions and keep the balance sheets updated.
Interpreting the Current Situation
The dramatic rise in the farm price of corn from $1.50 per bushel or lower in the fall of 2005 to mid-June 2008 forward contract prices approaching $8 per bushel for summer 2009 delivery is a by-product of the rapid expansion in the biofuels industry.
Another major factor behind the price increase is the limited availability of additional U.S. cropland. Rising foreign demand for grain and oilseed products also has contributed somewhat to higher prices, although the major factor clearly is biofuels.
Since the 2004-05 marketing year, the volume of U.S. corn processed for ethanol has increased by 1.65 billion bushels or 125%. Our projections, which are lower than recent projections from USDA, show another 28% or 825 million bushel increase likely in the marketing year beginning September 1, 2008. That’s a combined increase of almost 2.5 billion bushels in four years.
From 2004-05 to 2008-09, our projections show an 8.6 percent or 157 million bushel increase in U.S. corn exports and a 13% or 780 million bushel decrease in corn feed and residual use. Nearly all of the decrease in corn feeding is projected to occur this year, because of limited availability of corn.
With no changes in biofuels and Conservation Reserve Program policies, very tight U.S. and world corn supplies would appear likely for the next few years. At the same time, demand for additional cropland for corn is likely to keep soybean supplies tight. The balance sheets let you see the details on how corn and soybean supplies and demands are changing. They also show the potential impact on supplies (carryover stocks) remaining at the end or the marketing year, and on prices under a range of alternative crop yields.