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USDA Long-term Projections to 2016

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USDA Long-term Projections to 2016 Powered By Docstoc
					Agricultural Commodity Outlook
Chairperson World Agricultural Outlook Board Office of the Chief Economist U.S. Department of Agriculture

Gerald A. Bange

The National Academies Committee on 21st Century Systems Agriculture
Kansas City, Missouri March 27, 2008
http://www.usda.gov/oce/speeches/index.htm

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Special Note
U.S. Supply and Demand Projections for 2008/09 and Beyond in this Presentation are from USDA’s 2008 Outlook Forum and from USDA Agricultural Projections to 2017 Provisions of the Energy Independence and Security Act of 2007 are not Fully Reflected in USDA’s projections to 2017 Key Upcoming USDA Reports: - NASS Prospective Plantings Report -- March 31,2008 - World Agricultural Supply and Demand Estimates Report -May 9, 2008 - NASS Acreage Report -- June 30, 2008
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New Energy Act Bullish for Commodity Prices…
The 2007 Energy Act— Mandates very ambitious renewable fuel standard (RFS), starting at 9.0 billion gals in 2008 and increasing to 36 billion gals by 2022. 1 15 billion gallons of the RFS will be corn-based ethanol starting in 2015. By 2016, all of the RFS increase must be met with cellulosic ethanol or other non-corn starch biofuels.
comparison, the 2005 Energy Act had an RFS standard of 5.4 billion gals by 2008, rising to 7.5 billion by 2012.
3 1 In

Renewable Fuel Standards (RFS)
Corn starch based ethanol, 2006 through 2022
15.0
16 14 12 10 8 6 4 2 0
2006 2008 2010 2012 2014 2016 2018 2020 2022

Billion gallons

9.0 7.7 5.4
Energy Independence and Security Act of 2007 Energy Policy Act of 2005

Note: RFS levels under the Energy Policy Act of 2005 are projected for 2013 and beyond based on the act’s provisions and growth in motor gasoline consumption for transportation projected by the Energy Information Administration in Annual Energy Outlook 2008.

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U.S. Wheat Supply and Demand
2006/07 estimate Planted area (million acres) Harvested area (million acres) Yield (bushels per acre) Beginning stocks Production Imports Total supply Food, seed, and industrial use Feed and residual Domestic use Exports Total use Ending stocks Stocks to use ratio Average market price 57.3 46.8 38.7 571 1,812 122 2,505 1,015 125 1,140 909 2,049 456 22.3 4.26 2007/08 forecast 60.4 51.0 40.5 Million bushels 456 2,067 90 2,613 1,036 110 1,146 1,225 2,371 242 Percent 10.2 Dollars per bushel 6.65 2008/09 forecast 64.0 54.4 42.8 272 2,330 100 2,702 1,039 175 1,214 950 2,164 538 24.9 7.00 5.3
5

Change from 2007/08 Percent 5.9 6.6 5.7 -40.4 12.7 11.1 3.4 0.3 59.1 5.9 -22.4 -8.7 122.4

Potentially record global wheat production could lessen demand for U.S. exports
Million metric tons

700 600 500 400 300 200 100 0 2003 2004 2005 2006 2007 2008
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U.S. Corn Supply and Demand
2006/07 estimate Planted area (million acres) Harvested area (million acres) Yield (bushels per acre) Beginning stocks Production Total supply Feed and residual Food, seed, and industrial Ethanol Domestic use Exports Total use Ending stocks Stocks/use Average market price 78.3 70.6 149.1 1,967 10,535 12,514 5,598 3,488 2,117 9,086 2,125 11,210 1,304 11.6 3.04 2007/08 forecast 93.6 86.5 151.1 Million bushels 1,304 13,074 14,393 5,950 4,555 3,200 10,505 2,450 12,955 1,438 Percent 11.1 Dollars per bushel 4.00 2008/09 forecast 90.0 82.7 154.9 1,438 12,810 14,263 5,400 5,470 4,100 10,870 2,150 13,020 1,243 9.5 4.60 3.0 Change from 2007/08 Percent -3.8 -4.4 2.5 10.3 -2.0 -0.9 -9.2 20.1 28.1 3.5 -12.2 0.5 -13.5

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U.S. Soybean Supply and Demand
2006/07 estimate Planted area (million acres) Harvested area (million acres) Yield (bushels per acre) Beginning stocks Production Imports Total Supply Crush Seed and Residual Domestic use Exports Total Use Ending stocks Stocks/use ratio Average market price 75.5 74.6 42.7 449 3,188 9.0 3,647 1,806 148 1,955 1,118 3,073 574 18.7 6.43 2007/08 forecast 63.6 62.8 41.2 Million bushels 574 2,585 6.0 3,165 1,835 165 2,000 1,025 3,025 140 Percent 4.6 Dollars per bushel 10.40 2008/09 forecast 71.0 70.1 42.1 160 2,950 6.0 3,116 1,860 177 2,037 910 2,947 169 5.7 11.50 10.6
8

Change from 2007/08 Percent 11.6 11.6 2.3 -72.1 14.1 0.0 -1.5 1.4 7.1 1.8 -11.2 -2.6 20.9

Rice Supply and Demand
2006/07 estimate Planted area (million acres) Harvested area (million acres) Yield (pounds per acre) Beginning stocks Production Imports Total supply Domestic use Exports Total use Ending stocks Stocks/use Average market price 2.84 2.82 6,868 43.0 193.7 20.6 257.3 126.6 91.4 218.0 39.3
Percent

2007/08 forecast 2.76 2.75 7,185 39.3 197.5 21.5 258.3 124.7 112.0 236.7 21.6 9.1 12.00

2008/09 forecast 2.70 2.69 7,108 22.6 191.0 22.5 236.1 126.0 88.0 214.0 22.1 10.3 11.80

Change from 2008/09 Percent -2.2 -2.1 -1.1 -42.5 -3.3 4.7 -8.6 1.1 -21.4 -9.6 2.2

Million hundredweight

18.0 9.96

Dollars/hundredweight

-1.7
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U.S. Cotton Supply and Demand
2006/07 estimate Planted area (million acres) Harvested area (million acres) Yield (pounds per acre) Beginning stocks Imports Production Total supply Mill use Exports Total use Unaccounted Ending stocks Stocks to use ratio Average market price 15.3 12.7 814.0 6.1 0.0 21.6 27.7 4.9 13.0 18.0 0.2 9.5 52.8 46.50 2007/08 forecast 10.8 10.5 871.0 Million bales 9.5 0.0 19.0 28.5 4.6 14.5 19.1 0.0 9.4 Percent 49.2 Cents per pound 55.10* 2008/09 forecast 9.5 8.6 835.0 8.2 0.0 15.0 23.2 4.5 15.0 19.5 0.0 3.7 19.1 Change from 2008/09 Percent -12.3 -18.0 -4.1 -13.5 0.0 -21.2 -18.6 -2.2 3.4 2.1 -60.5

*Ave. price for Aug. 2007 through Jan. 2008

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Net Returns Outlook for the Major Field Crops Spring 2006 and 2007
$ per acre 500

2006
450 400 350 300 250 200 150 100 50 0 Corn Soybeans

2007

Wheat

Rice

Upland Cotton
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Net Returns Outlook for the Major Field Crops Spring 2006, 2007, and 2008
$ per acre 500

2006
450 400 350 300 250 200 150 100 50 0
Corn Soybeans

2007

2008

Wheat

Rice

Upland Cotton

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Major Crop and CRP Acreage
(USDA Outlook Forum – Feb. 2008)
2007/08 2008/09 Million acres Corn Soybeans Wheat All Cotton Rice 5-crop total CRP acres 93.6 63.6 60.4 10.8 2.76 231.2 36.8 90.0 71.0 64.0 9.5 2.70 237.2 34.8 -3.6 +7.4 +3.6 -1.3 -0.1 +6.0 -2.0 Change

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Area Planted, 5 major crops
USDA forecasts and actual for 2007/08
Initial 2007/08 forecast 1/ March June Actual 2007/08 2007/08 2007/08 forecast 2/ forecast 3/ acreage Million acres Corn 87.0 90.5 92.9 93.6 Soybeans 70.5 67.1 64.1 63.6 Wheat 60.0 60.3 60.5 60.4 All Cotton 13.0 12.1 11.1 10.8 Rice 2.9 2.6 2.7 2.8 5-crop total 233.4 232.6 231.3 231.2 1/ March 2, 2007 Agricultural Outlook Forum. 2/ March 30, 2007 Prospective Plantings , from the National Agricultural Statistics Service. 3/ June 29, 2007 Acreage , from the National Agricultural Statistics Service.
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U.S. Wheat Planted Area Trend
Mil. acres 70
64 63 59 60 62 60 57 57 60.4 60 59 58 57 57 56 56 55.5 56

65

60

55

50

45

40 2000 2002 2004 2006 2008F 2010F 2012F 2014F 2016F

Note: 2008 planted area forecast from USDA’s Grains & Oilseeds Outlook, Agricultural Outlook Forum, Washington, D.C., February 22, 2008. Projections for 2009-2017 are from USDA Agricultural Projections to 2017, February 2008.

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U.S. Corn Planted Area Trend
Mil. acres 100

95

93.6 90 91

93

92

91

91

91.5 91.5 91.5

92

90

85
81 82 78 80 76 79

80

79

75

70 2000 2002 2004 2006 2008F 2010F 2012F 2014F 2016F

Note: 2008 planted area forecast from USDA’s Grains & Oilseeds Outlook, Agricultural Outlook Forum, Washington, D.C., February 22, 2008. Projections for 2009-2017 are from USDA Agricultural Projections to 2017, February 2008.

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U.S. Soybean Planted Area Trend
Million Acres

80 70

74.3 74.1 74.0 73.4 75.2

75.5 72.0 71.0 63.7 69.5 69.0 68.5 68.5 68.5 68.0 68.0 68.0

60 50 40 30
20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16

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U.S. Ethanol Production Capacity
Annual Capacity by Month
Bil. Gallons 14

11.9
12 10 8 6 4 2 0 Sep-06

6.8 5.0

Mar-07

Sep-07

Mar-08

Sep-08
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U.S. Corn Used for Ethanol
1995/96 through 2015/16*
Bil. bushels 6.0 Ethanol corn use 5.0 4.0 Ethanol share of corn use Percent
35 30

31 % 4.1 3.2

5.6

25 20 15

3.0 2.0
10

1.0 0.0 1995/96 1999/00 2003/04 2007/08F 2011/12*

5 0

2015/16*

Note: 2007/08 is projected based on the World Agricultural Supply and Demand Estimates, February 8, 2008. 2008/09 is projected based on USDA’s Grains & Oilseeds Outlook, Agricultural Outlook Forum, Washington, D.C., February 22, 2008. *Projection for 2009/10 based on RFS mandates for corn starch based ethanol under the Energy Independence and Security Act of 2007.

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Daily Cash Market Corn Prices
2004/05 through 2007/08 to date
$/bu. 6.00 5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50
4-Sep 4-Oct 4-Nov 4-Dec 4-Jan 4-Feb 4-Mar 4-Apr 4-May 4-Jun 4-Jul 4-Aug

2004/05 2005/06 2006/07 2007/08

Note: Central Illinois cash bids.

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U.S. Domestic Corn Use
1995/96 through 2008/09F
Bil. bushels 12 Other food, seed, and industrial 10 8 6 4 2 0 1995/96 2000/01 2005/06 2008/09F Ethanol Feed and residual

Note: 2007/08 projections based on the World Agricultural Supply and Demand Estimates, March 11, 2008. 2008/09 projections from USDA’s Grains & Oilseeds Outlook, Agricultural Outlook Forum, Washington, D.C., February 22, 2008.

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China Corn Production and Consumption
1995/96 through 2007/08F
Mil. Metric Tons 160 Production 150 140 130 120 110 100 90 80 1995/96 1997/98 1999/00 2001/02 2003/04 2005/06 2007/08F
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Consumption

Note: 2007/08 production and consumption are projected based on the World Agricultural Supply and Demand Estimates, January 11, 2008.

China Corn Exports
1995/96 through 2007/08F
Mil. Metric Tons 16 Exports 14 12 10 8 6 4 2 0 1995/96 1997/98 1999/00 2001/02 2003/04 2005/06 2007/08F
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Imports

Note: 2007/08 production and consumption are projected based on the World Agricultural Supply and Demand Estimates, January 11, 2008.

U.S. Soybean Oil Supply and Demand
2006/07 estimate
Beginning stocks Production Imports Total supply Domestic Methyl ester Exports Total use Ending stocks Average market price 3,010 20,487 37 23,535 18,743 2,796 1,888 20,630 2,904 31.02

2007/08 forecast
Million pounds 2,904 21,195 37 24,137 18,900 2,800 2,400 21,300 2,837 Cents per pound 55.00

2008/09 forecast
2,502 21,205 50 23,757 19,750 3,500 1,850 21,600 2,157 49.50

Change from 2008/09
Percent -13.9 0.0 33.4 -1.6 4.5 25.0 -22.9 1.4 -24.0 -10.0

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U.S. Biodiesel Mandate . . .
(2007 Energy Act)
Million gallons 1,200 1,000 800 600 400 10 200 0 2001/02 2003/04 2005/06 2007/08F 2009/10 2011/12 2013/14 2015/16 5 0
25

Percent 35 30 25 20 15

Biodiesel Consumption Mandate Share of Soybean Oil Prod.

13%

Daily Cash Market Soybean Prices
2004/05 through 2007/08 to date
$/bu. 15.50 14.50 13.50 12.50 11.50 10.50 9.50 8.50 7.50 6.50 5.50 4.50
4-Sep 4-Oct 4-Nov 4-Dec 4-Jan 4-Feb 4-Mar 4-Apr 4-May 4-Jun 4-Jul 4-Aug

2004/05 2005/06 2006/07 2007/08

Note: Central Illinois cash bids.

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Soybean Oil Futures Prices
December 2008 Contract
Cents/lb. 75 70 65 60 55 50 45 40 35 30 25
1-Aug06 1-Oct06 1-Dec06 1-Feb07 1-Apr07 1-Jun07 1-Aug07 1-Oct07 1-Dec07 1-Feb08

Note: Chicago Board of Trade daily settlement prices.

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Biodiesel Margin
cents/lb
150 100 50 0 -50 -100 Jun-06 Oct-06 Feb-07 Jun-07 Oct-07 Feb-08

SBO costs exceed $4/gal

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China Soybean Import Dependence Expected to Increase in the Next 10 Years
80 70 60 50 40 30 20 10 0 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Million Tons

Percent
80

Imports Production Import Dependence
70 60 50 40 30 20 10 0

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Soybean Production Trends
Million Tons
250 225

U.S.
200 175 150 125 100 75 50 25 0 1994 1996

Brazil

Argentina

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016
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2007-crop and 2008-crop through March 24, 2008
Soybean/corn 2.70 2.60 2.50 2.40 2.30 2.20 2.10 2.00 1.90
1-Sep 1-Oct 1-Nov 1-Dec 1-Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug

New-crop Soybean/Corn Price Ratios
Nov 2007 Soybeans/Dec 2007 Corn Futures Nov 2008 Soybeans/Dec 2008 Corn Futures

Note: Chicago Board of Trade daily settlement prices.

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U.S. Ammonia Prices, weekly
$ per short ton
700 650 600 550 500 450 400 350 300 250 200 Jan 04 Apr 04 Jul 04 Oct 04 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06 Apr 06 Jul 06 Oct 06 Jan 07 Apr 07 Jul 07 Oct Dec 07 07
32

New Orleans Barge Mid Corn Belt

Source: Green Markets Fertilizer Market Intelligence Weekly

Projected Growth Rates
2008 U.S. EU-27 Japan China India World
Source: Oxford Economics

2009 2.7 2.4 2.0 9.2 7.7 3.6

2010 3.5 2.3 2.1 8.7 7.6 3.7

Average 2.7 2.3 1.9 9.8 7.7 3.6
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1.8 2.1 1.5 11.4 7.8 3.4

U.S. Nitrogen Production and Imports
Million tons

16 14 12 10

Production Imports

8 6 4 2 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

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U.S. Meat Production and Prices
Item Production Beef Pork Broilers Turkey Total meat Prices Steers Hogs Broilers Turkey 2006 Billion pounds 26.15 21.06 35.50 5.68 89.23 2007 Billion pounds 26.42 21.94 36.13 5.96 91.27 Change from 2006 Percent 1.0 4.2 1.8 4.9 2.3 2008 Billion pounds 26.44 23.14 37.13 6.14 93.67 Change from 2007 Percent 0.1 5.4 2.8 3.0 2.6

85.41 47.26 64.4 77.0

91.82 47.09 76.4 82.1

Dollars/Cwt 6.41 -0.17 Cents/pound 12.1 5.1

90.88 42.38 76.4 81.1

-0.94 -4.71 0.0 -1.0

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U.S. Soybean Meal Supply and Demand
2006/07 estimate
Beginning stocks Production Imports Total supply Domestic Exports Total use Ending stocks Average market price 314 43,027 156 43,497 34,360 8,786 43,146 351 205.44

2007/08 forecast
Thousand short tons 351 43,784 165 44,300 35,300 8,700 44,000 300 Dollars per short ton 335.00

2008/09 forecast
300 44,235 165 44,700 35,600 8,800 44,400 300 300.00

Change from 2008/09
Percent -14.5 1.0 0.0 0.9 0.9 1.2 0.9 0.0 -10.4

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Hog-Corn Price Ratio
Bushels of Corn per 100 lbs of Live Hogs

30 25 20 15 10 5 0 1997 1999 2001 2003 2005 2007

*Based on NASS Prices Received

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U.S. Milk Supply and Demand
Item Production Commercial use CCC net removals 1/ Butter Cheese Nonfat dry milk Dry whole milk Average market price 2/ Class III Class IV All milk 2006 181.8 184.1 2007 185.6 188.3 Change from 2006
Percent

2008
Billion pounds

Change from 2007
Percent

Billion pounds Billion pounds

2.1 2.2
Percent

190.7 194.0
Million pounds

2.7 3.1
Percent

Million pounds Million pounds

0 0 64 0

0 0 0 0
Dollars/Cwt

0 0 0 0

11.89 11.06 12.90

18.04 18.36 19.13

6.15 7.30 6.23

16.45 15.30 17.60

-1.59 -3.06 -1.53

1/ Includes products exported under the dairy export incentive program. 2/ Prices are mid-point of published forecasts; milk of average fat test.

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Milk-Feed Price Ratio
Pounds of dairy feed per pound of milk*

4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1997 1999 2001 2003 2005 2007

*Based on NASS Prices Received

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Price Summary
2006/07 estimate 2007/08 forecast (midpoint) 6.65 12.00 4.00 10.40 55.00 335.00 55.10* 90.88 42.38 76.4 81.1 1.77 1.27 1.38 0.28 16.45 15.30 17.60 Change from last year Percent 56.1 20.5 31.6 61.7 77.3 63.1

Crops and products
Wheat ($/bu) Rice ($/cwt) Corn ($/bu) Soybeans ($/bu) Soybean oil (¢/lb) Soybean meal ($/s.t.) Cotton (¢/lb) 4.26 9.96 3.04 6.43 31.02 205.44 46.50 91.82 47.09 76.4 82.1 1.74 1.34 1.71 0.60 18.04 18.36 19.13

Livestock
Steers ($/cwt) Hogs ($/cwt) Broilers (¢/lb) Turkeys (¢/lb) -1.0 -10.0 0.0 -1.2 2.0 -5.4 -19.4 -53.2 -8.8 -16.7 -8.0

Dairy products
Cheese Butter Nonfat dry milk Dry whey

Milk classes
Class III ($/cwt) Class IV ($/cwt) All milk ($/cwt)

*Average price for August 2007-January 2008. USDA is prohibited by law from publishing cotton price projections.

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Consumer Prices and Prices Received by Farmers

Year 2005 2006 2007 2008

CPI for Food 2.4 2.4 4.0 3.5-4.5

Farm Prices Percent -2.7 0.1 18.1 ?

Sources: U.S. Bureau of Labor Statistics, National Agricultural Statistics Service, Economic Research Service

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U.S. Agricultural Exports and Imports
Billion $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 27.3

101

76.5
59.8 49.1

Exports Imports Trade Surplus
24.5 11.9

'87

'89

'91

'93

'95

'97

'99

'01

'03

'05

'07
42

Cash Farm Income and Government Payments
Billion dollars

100 90 80 70 60 50 40 30 20 10 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Net cash income Government payments

Source: Economic Research Service, USDA
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Adjustments to Outlook Stemming From Provisions of 2007 Energy Act
Corn, Soybean, and Soybean Oil Prices would be Higher Overall Acres would be up with a Greater Proportion Planted to Corn and Soybeans Given Higher prices, Exports and Feed Use of Feed Grains would be Lower Soybean Meal would be more Plentiful Further Adjustments in the Livestock Sector would be Required
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