The USDA today released its newest 10-year agricultural projections. The report said that corn used for ethanol will more than double 2004/'05 levels in the next 10 years. As a result, corn is expected to continue out-dueling soybeans for acreage, resulting in decreased soybean and soy product exports.

USDA Agricultural Projections to 2016 assumed that crude oil prices will fall from 2007 to 2010 as new crude supplies offset the rise in Asian demand. In subsequent years crude oil prices are projected to rise, but only slightly faster than the general inflation rate, the report said.

A slight drop in crude prices appears to help cool the explosion in ethanol plant construction, which the USDA projects will slow after 2010. However, corn acreage is expected to rise significantly in the initial years of the projections due to ethanol demand. The result will be higher corn prices and net returns. In the longer run, increasing corn exports will also underlie higher corn acreage. The increase in corn plantings is facilitated, in part, by a reduction in soybean acreage, the report said.

The domestic use of soybeans is expected to continue to slowly rise, but exports will decline due to moderate production gains and increased global competition-specifically, Brazil. Growth in domestic demand for soy meal will be tempered somewhat by the rising volume of distillers grains. Increased feeding of distillers grains is expected to meet growing livestock feed demand.

International growth is expected to impact both corn and soybeans. Global economic growth and an increase in global meat production is expected to increase U.S. corn exports after 2010/'11.

China is assumed to increase its corn production. However, by 2012/'13 the country is expected to become a net corn importer as demand for livestock feed overtakes China's internal supplies for corn, the report said. China will also impact soybeans markets. The country is expected to account for over 70 percent of the world's 27-million-ton growth in soybean exports over the next 10 years.

Brazil's rapidly expanding soybean acreage is expected to increase its share of world exports of soybeans plus the soybean equivalent of soymeal exports from about 32 percent in recent years to 45 percent by 2015. World soybean trade is expected to grow at an average annual rate of 3.6 percent. Countries with limited opportunity to expand oilseed production are expected to invest in oilseed crushing capacity, resulting in import demand for soybeans growing faster than soy meal or oil, the USDA said.

The end result for U.S. producers will be a drop in export demand for soybeans. Low prices will help U.S. exports approach 1.1 billion bushels in the next several years. However, exports will then decline to less than 1 billion bushels as U.S. acreage is shifted from corn to support ethanol production and competition from Brazil strengthens. Consequently, the U.S. market share of global soybean trade will decline. U.S. exports of soy meal and oil will also face strengthening competition from South American producers, limiting gains in U.S. meal and oil exports.

The baseline projections take into consideration a number of assumptions based on existing legislation. Provisions of the 2002 Farm Bill and Energy Policy Act of 2005 were expected to remain in effect over the projection period. Normal weather was also assumed throughout the period.

Current legislation will almost surely change over the course of the USDA's projections. A new Farm Bill is under development for 2007 and various federal legislators and President George W. Bush have announced proposals to dramatically change or expand the renewable fuels standard included in the Energy Policy Act of 2005.

The baseline projections assume that the Energy Policy Act of 2005's renewable fuels standard will be significantly exceeded in 2010. In subsequent years, ethanol production is assumed to be closer to the levels in the legislation.

The report also assumes that area enrolled in the Conservation Reserve Program is assumed to rise to 39.2 million acres from the 35 million acres currently enrolled.

The projections were prepared in October through December 2005 interagency committees in the USDA, with the Economic Research Service having the lead role in the report's preparation.

Dave Nilles is Online Editor for Biodiesel Magazine. Reach him at dnilles@bbibiofuels.com or (701) 373-0636.

Posted: 1:15 p.m. CST Wednesday, February 14, 2007