The USDA's World Agricultural Supply and Demand Estimates for May

Corn. Yield estimates used in the WASDE report are developed using model projections, much the same way as Global Insight develops its own projections. The biggest difference is the corn use for ethanol. While we both show huge increases in yields, the USDA projects a 58% jump and Global Insight forecasts a 30% increase. The difference between these two growth rates is 700 million bushels—which is significant. When you get to the bottom line of ending stocks, the 700-million-bushel difference shows USDA's stock number being flat, at roughly 900 million bushels. Global Insight's ending stock projection for 2007/08 is nearly 1.9 billion bushels. Looked at from another perspective, this is the difference between falling corn prices (in the Global Insight forecast) and stable-to-rising prices (in the WASDE report). This will also have an impact on any shift out of corn and back to soybeans in 2008, which Global Insight has forecasted (albeit, only modestly).

Wheat. The next biggest difference between the WASDE and the Global Insight forecast is the wheat demand outlook for 2007. Basically, the USDA has both exports and residual/feed wheat demand higher than we do. The total difference is 90 million bushels, which again results in considerably different ending stock estimates for the 2007/08 crop year. The USDA has wheat stocks up marginally (by 60 million bushels, to 470 million), while our forecast has them up by 130 million bushels. The principal export difference is over wheat exports out of Canada. Canadian farmers have indicated a 10% decline in wheat plantings, with increased canola, barley, and oat acreage.

Rice. The rice balance is expected to move toward tighter supplies during the next crop year, the result of significantly lower planted area. The USDA puts 2007 production at 183 million cwt (100 weight/pounds), while Global Insight has it at 181 million cwt. The USDA has larger carry-out stocks from the 2006 season due to lower exports of 97 million cwt. Relative to Global Insight's recent forecast, the errors largely offset each other and stocks are projected to be a little over 23 million cwt, tight by historical standards. The USDA's projected price range is $10.25–10.75 per cwt.

Soybeans. The 2007 soybean supply and demand situation put forth in the May WASDE is much the same as Global Insight's recent forecast. The only significant difference is export levels. Exports are expected to be flat in WASDE, while we estimate a 55-million-bushel drop. The driving force in both forecasts is the nearly 8.5-million-acre drop in planted acreage, and the resulting large decline in production. Soybean stocks are projected to drop from a relatively high level of 610 million bushels on September 1, 2007, to a significantly tighter level of 320 million bushels, according to WASDE. Global Insight has stocks dropping to 375 million bushels. The USDA projects the farm level soybean price for the 2007 season to rise from $6.30 to around $7.00 per bushel.

Cotton. The 2007 cotton situation in the May WASDE report also looks very similar to the Global Insight forecast. The USDA lowered its cotton export estimate for 2006, but included a large rebound for 2007. Global Insight projects a similar path. Indeed, the USDA put cotton yields at 820 pounds per acre, almost exactly the level projected by Global Insight. As a result of a 3.1-million-acre drop in planted acreage during 2007, production is estimated to fall from 21.6 million bales to 18.8 million bales. When the dust settles on the 2007/08 crop year, we expect to see stocks drop from a projected 9.5 million bales in 2007 to 6.4 million bales in 2008, still a large number by historical standards.