URBANA - A number of factors have contributed to cash corn prices moving sharply higher over the past two weeks, said a University of Illinois Extension marketing specialist.

"The average cash price of corn in central Illinois reached a 2006-07 marketing year high of $4.125 on Feb. 22," said Darrel Good. "Prices moved lower in March, with a low of $3.16 reached on April 3, following the release of the USDA's Prospective Plantings report. Since then, prices have recovered by 50 cents, with the average central Illinois' overnight bid at country elevators quoted at $3.66 on May 4.

"Part of the recovery in cash prices has resulted from a strengthening of the basis. The average spot cash bid was about 43 cents under July futures in late March and early April, but was only 25 cents under on May 4. The basis in that area is now a bit stronger than the basis of a year ago, and only five cents and seven cents weaker than in 2005 and 2004, respectively."

Good added that the stronger basis likely reflects a slowdown in farmer sales of old-crop corn even as consumption continues at a rapid pace. The new-crop basis is still generally weak, with the harvest basis on May 4 about 16 cents weaker than the previous four-year average.

In addition to the stronger basis, cash prices have moved higher along with higher futures prices. July 2007 futures peaked at about $4.60 in late February, declined to about $3.60 in early April, but settled at $3.90 on May 4.

"Futures prices have been supported by a combination of a continued high rate of consumption and delays in planting the 2007 crop," said Good. "The USDA reported that only 23 percent of the crop was planted as of April 29. That compared to 48 percent planted last year and the 2002-2006 average progress of 42 percent.

"Progress was likely slow in western growing areas during the week ended May 6. The slow progress raises concerns that some intended corn acreage will not be planted and that yield potential will be negatively impacted by the late planting."

The USDA will release an estimate of planted acreage on June 29. Until then, the market will focus on planting progress and the weekly report of crop conditions. July and August weather is most important for determining yields, but the late planting may increase the risk of falling short of trend yields.

Since 1973, the central Illinois cash price of corn has never established a marketing year high in February, Good noted.

"The same is true for December futures," he said. "There is no fundamental reason that the February high this year cannot hold as the marketing year high, but the late planting in combination with a high rate of consumption and declining stocks adds to the speculation that new highs will yet be established.

"Other than September--eight times, the cash price in central Illinois has most often reached a high in July--seven times, followed by June--five times--and August--four times."

The average cash price of soybeans in central Illinois reached a 2006-07 marketing year high of $7.505 on Feb. 22, declined to $6.775 on April 24, and stood at $7.005 on May 4. The recovery since April 24 has resulted from a marginal (four cents) strengthening of the basis, which remains unusually weak, and a 19-cent increase in July futures.

"In general, soybean prices are being supported by soybean oil prices," said Good. "The cash price of soybean oil at central Illinois plants is near 32 cents per pound, 28 percent higher than prices of a year ago.

"At $187 per ton, the average central Illinois plant price of soybean meal is only about 5 percent above the price of a year earlier. The average country elevator spot cash bid for soybeans is 22.7 percent higher than the price of a year ago, even though the basis is about 15 cents weaker."

Soybean oil prices continue to move higher even though domestic inventories are at a record level. Stocks at plants at the end of March were estimated at 3.354 billion pounds, 23 percent larger than stocks of a year ago.

"Soybean oil prices are being supported by the global increase in biodiesel production that is consuming larger quantities of canola oil, palm oil, and soybean oil," said Good. "The Census Bureau estimates that 220 million pounds of soybean oil were used for biodiesel production in the United States during March 2007. That represents 13 percent of total domestic use and exports of soybean oil during the month.

"Like corn prices, cash soybean prices in central Illinois have never established a marketing year high in February, as has been the case so far this year. Over the last 33 years, highs have tended to occur in July–eight times, June–five times, September–six times, and May–four times. For the current high to be exceeded, some summer crop concerns will likely be required."

Urbana - Ethanol plants use about three gallons of water for every gallon of ethanol they make, using the dry grind process. But investigators at the University of Illinois are trying to determine if the amount of water that is recycled during ethanol production can be increased--significantly.

"If you have a plant that's going to produce 100 million gallons of ethanol, like the proposed Anderson plant, that's about 400 million gallons of water per year, and that's not a trivial amount," said Kent Rausch, a U of I agricultural and biological engineer involved in the project. "If we can increase the amount of recycled water from 50 to 85 percent, that will make a big difference from economic and environmental standpoints."

In the conventional dry grind process, raw corn is finely ground and cooked; then the starch is fermented and converted into ethanol. After the ethanol has been recovered, the remaining material is called whole stillage. It contains water, protein, fat, fiber and ash from the corn kernel and yeast. This stillage is run through a centrifuge and about 50 percent of the water is recycled. The soluble material that remains after centrifuging is called thin stillage.

Rausch and his colleagues are planning to add membrane filtration--filtration through very small holes--to the process at this point. "We're looking at filtering the thin stillage to improve our ability to recycle it," said Rausch. "Impurities that inhibit yeast growth build up in the water and reduce ethanol yield; that makes the process less efficient." Although a total recycle may not be possible, he said, "Our goal is to get rid of those impurities so more water can be recycled."

Rausch and his colleagues are also experimenting with a modified dry grind process that removes much of the protein, fiber and fat before the fermentation process.

"As a result, the thin stillage obtained from the modified dry grind process will be different," said Rausch. "This will affect the filtration rate through the membrane, so we will test which membrane construction and pore size will work most effectively with each process."

Vijay Singh, an agricultural and biological engineer at the U of I, and Ron Belyea, an animal scientist at the University of Missouri, are co investigators for this study, which is being funded by the Council on Food and Agricultural Research (C-FAR).

"Water use is important to the economic well being of the plant even where water is plentiful," Rausch concluded. "Reducing the demand for water in the process should reduce the environmental footprint. We want these facilities to do all they can to be good stewards in the community."

URBANA - If the 2007 soybean crop lives up to its potential, some further weakness in soybean prices can eventually be expected, particularly in prices for the 2007 crop, said a University of Illinois Extension marketing specialist. "November 2007 futures may have risk down to near the $7.20 area," said Darrel Good.

Good's comments came as he reviewed the recent trajectory of soybean prices. The USDA's March 30 Grain Stocks and Prospective Plantings reports were generally viewed as friendly for soybean prices. However, prices have declined sharply over the past two weeks.

"Smaller-than-expected March inventories of U.S. soybeans and smaller-than-expected soybean planting intentions were judged to be supportive of soybean prices, with some calling the news 'widely bullish,'" said Good. "Since the release of the reports, however, soybean prices have declined 35 to 40 cents. "Two important and related factors have contributed to the decline. These are the decline in the rate of consumption of U.S. soybeans and the much larger soybean production estimates for South America."

The USDA now expects the 2006-07 marketing year domestic soybean crush to reach only 1.765 billion bushels, 15 million less than the projection that has been in place since November and only 26 million bushels larger than last year's crush. The crush during the first half of the marketing year totaled 908.5 million bushels, 28.9 million bushels larger than the crush of a year earlier.

"The smaller forecast for domestic crush reflects anticipation of a slowdown in both domestic and export use of soybean meal," said Good. "The USDA lowered the projection of marketing year soybean meal consumption by 600,000 tons, or 1.4 percent. Domestic use is expected to be negatively impacted by declining livestock feeding margins, while exports will face competition from increased supplies from South America."

The USDA now projects 2006-07 marketing year exports of U.S. soybeans at 1.08 billion bushels, 20 million less than forecast in March and 65 million less than the largest forecast made in December 2006. The Census Bureau provides the official count for soybean exports on a monthly basis, but with about a six-week lag.

"From September 2006 through January 2007, cumulative Census Bureau export estimates for soybeans were almost identical to the estimate in the weekly USDA Export Sales report and about 22 million less than reported in the USDA's weekly report of export inspections," said Good. "Through February, the Census Bureau estimate was 7 and 13.5 million less than the USDA estimates, respectively.

"The USDA's Export Sales report showed cumulative exports through April 5 of 878.5 million bushels, while the inspections report showed a total of 882 million. If those estimates slightly overstate Census Bureau figures, then exports during the last 21 weeks of the year need to total about 210 million bushels, for an average of 9.9. million per week, to reach the USDA projection."

For the four weeks ended April 5, shipments averaged about 21.5 million bushels per week, Good noted. Inspections totaled only 12.5 million for the week ended April 12. A further slowdown in the rate is expected as South American supplies from the 2007 harvest are now available.

The USDA now projects the 2007 South American harvest at 4.135 billion bushels, 150 million larger than the March forecast and 310 million larger than the record harvest of 2006. Production in Brazil is expected to be up almost 11 percent even though area harvested is down 5.5 percent.

"The Argentine crop is expected to be almost 17 percent larger, with harvested acreage up only 4 percent," said Good. "That crop will result in much smaller exports of U.S. soybeans through at least September 2007."

Good added that the forecast of seed use of soybeans in the United States this year was reduced four million bushels due to the smaller-than-expected planting intentions. However, the projection of feed and residual use of soybeans was increased 20 million bushels based on the large disappearance in that category during the first half of the year.

"The large, unexplained use may imply that the 2006 crop has been slightly overestimated," he said.

Stocks of U.S. soybeans at the end of the current marketing year are projected at 615 million bushels, representing 20.3 percent of projected consumption and at least 400 million above what might be considered an adequate level of year-ending stocks.

The large inventory partially offsets the impact of the planned decline in acreage, he noted. If soybean acreage is near intentions, about 66.2 million acres will be harvested in 2007. If the U.S. average yield is at the average of the past three years (42.6 bushels), the 2007 crop would total 2.82 billion bushels. A crop of that size would likely point to 2007-08 marketing year ending stocks well above 300 million bushels.

"Even with the recent decline in prices, soybean prices remain about $1.50 above the level that would have historically been expected by the size of the current surplus," he said. "The continued price strength is coming primarily from soybean oil prices.

"General strength in vegetable oil prices, particularly palm oil prices, due to expanding world biodiesel production, along with high crude oil prices, account for the strength in soybean oil prices."

URBANA - Total costs to produce corn in Illinois in 2006 were $488 per acre, a 6.5 percent increase over 2005, according to a recent University of Illinois Extension study. The same report showed costs for soybeans increased $24 per acre over the same period.

"Broken down by regions, costs were lower in southern Illinois primarily because of lower land costs," said Dale Lattz, U of I Extension farm management specialist who prepared "Cost to Produce Corn and Soybeans in Illinois--2006," which is available (http://www.farmdoc.uiuc.edu/manage/newsletters/fefo07_05/fefo07_05.html) on Extension's farmdoc website.

"The total of all economic costs per bushel in the different sections of the state ranged from $2.74 to $3.11 for corn and from $6.94 to $7.30 for soybeans. Variations in this cost were related to weather, yields, and land quality."

The report was prepared with data provided by the Illinois Farm Business Farm Management (FBFM) Association, which consists of 5,800-plus farmers and 60 professional field staff. The state is divided into four regions for the study: northern, central with "high" soil ratings, central with "low" soil ratings, and southern.

"The sample farms had no livestock and had more than 500 acres of productive and nearly level soils in each area of the state," said Lattz.

In 2006, the total of all economic costs per acre for growing corn in Illinois averaged $502 in the northern section, $500 in the central "high" section, $472 in the central "low" section, and $448 in southern Illinois. Soybean costs per acre were $387, $386, $361, and $341, respectively.

"Costs per bushel of corn in 2006 as compared to 2005 were lower for all geographic areas of the state except the southern region," said Lattz. "Costs per bushel were lower due to higher corn yields.

"The average corn yield in 2006 was 38 bushels per acre higher in northern Illinois than in 2005, 20 to 25 bushels higher in central Illinois, and six bushels per acre higher in southern Illinois."

However, costs per acre were higher in all the different geographic sections compared to 2005.

"Across the state, total costs per acre to produce corn increased 5 to 8 percent," said Lattz. "A number of costs increased, including fertilizer, seed, fuel, insurance, and land costs.

"The non-land interest cost per acre increased the most due to higher interest rates and higher grain inventory values."

Production costs per bushel of soybeans in 2006 increased in all areas of the state except for the northern region as compared to 2005.

"Costs per bushel for soybeans increased mainly due to higher per acre costs," he explained. "Soybean yields were the same or slightly higher than the year before except for the southern region. Soybean yields ranged from one bushel per acre lower to four bushels per acre higher in 2006 as compared to 2005.

"Increases in costs per bushel ranged from 12 cents in central Illinois with the lower rated soils to 71 cents in southern Illinois. Costs per bushel were five cents less in northern Illinois."

Like corn, total costs per acre to produce soybeans increased in all geographic regions of the state compared to 2005. Costs increased $27 per acre in northern Illinois, $19 per acre in central "high" soils, $20 per acre in central "low" soils, and $28 per acre in southern Illinois.

"Fertilizer, fuel, and interest were some of the costs that increased," said Lattz. "Average soybean yields in the different areas ranged from one to six bushels per acre higher than the four-year average from 2003 to 2006."