[^1]Presentation to National Grain and Oils Information Center

Beijing, China, July 2, 2007

Gerald A. Bange

Chairperson, World Agricultural Outlook Board

Office of the Chief Economist, United States Department of Agriculture

**THE SITUATION AND OUTLOOK FOR WORLD**

**CORN, SOYBEAN, AND COTTON MARKETS\***

**Introduction**

Let me begin by thanking the National Grain and Oils Information Center
for inviting me to speak at this important meeting. As many of you know,
I have had the good fortune to visit China many times since 1983, 8
times to be exact. My work with China has been a highlight of my 37
years with the United States Department of Agriculture (USDA).

As chairman of the World Agricultural Outlook Board (WAOB), I am
responsible for overseeing the coordination, review, and clearance of
all commodity forecasts released by USDA. As you know, USDA forecasts
are the primary source of information used by world commodity markets.
The *World Agricultural Supply and Demand Estimates (WASDE)* report, for
which I am responsible, is released monthly by USDA according to a
published schedule. It is the Board's responsibility to ensure that USDA
estimates and forecasts are unbiased, based on sound information, and
released in a timely manner.

When I spoke here 3 years ago, biofuels were just beginning to have a
significant impact on agricultural markets. Since that time, in response
to sharply higher petroleum prices, the use of corn and soybeans for
ethanol and biodiesel production, respectively, has grown dramatically
**(Figure 1)**. Today, I will present USDA's views regarding the outlook
for world grain, soybean, and cotton markets in light of these recent
developments.

**Developing Economies Lead Agriculture Growth**

Prospects for world economic growth look very good. The world economy is
expected to grow 3 to 4 percent annually for the foreseeable future
**(Figure 2.)**. The European Union, Japan, and the United States are
all expected to grow at an annual rate of 2 to 3 percent through 2010.
Economic growth in developing countries is projected even stronger and
is expected to range between 4 and 9 percent annually for the same
period. Argentina and countries in Latin America are projected at the
low end while China and other Asian countries are projected at the high
end of this forecast. If correct, this is good news for agriculture.
While consumers in high-income nations spend less than 10 cents of each
additional dollar they earn on food, consumers in developing countries
increase food purchases by 30 to 40 cents for each additional dollar
they earn. Clearly, developing economies will be the dominant force
underlying the growth in world agricultural production and trade.

World commodity markets cannot be discussed without addressing China's
remarkable economic growth which has boosted the demand for many
products. With annual growth rates of 10 percent or more in recent
years, China has been the world's fastest growing large economy. This
trend is expected to continue for the foreseeable future, albeit at a
slightly slower growth rate. China's imports of raw materials and
agricultural products have increased dramatically. Thus, China's booming
economy is contributing to stronger world prices for major commodities,
such as crude oil **(Figure 3)** and building materials. At the same
time, China is using much of the world's shipping capacity, which has
boosted ocean freight rates to record levels in recent months.

**World Corn Market Outlook Transformed by Ethanol**

Corn based ethanol is expected to be the primary biofuel in the United
States for the next several years. Despite expected increases in corn
production in the United States and abroad, there is no doubt that the
demand for corn to produce ethanol in the United States will drive U.S.
and world commodity prices higher. With prospects for much stronger
prices, U.S. corn producers, this past spring, indicated intentions to
plant 90.5 million acres (36.6 million hectares) to corn, the largest
corn area since 1944, and 16 percent more than 2006/07 **(Figure 4)**.

Assuming this year's intended acreage is realized and summer weather
supports a national average trend yield around 150 bushels per acre,
2007 production is expected to increase about 2 billion bushels from
2006's production of 10.5 billion (267.6 million metric tons) **(Figure
5)**. At 12.5 billion bushels (316.5 mmt), this year's production would
far exceed 2004's record of 11.8 billion bushels (299.9 mmt). Supplies
for 2007/08 would be a record 13.5 billion bushels (342.0 mmt), up 950
million bushels (24.1 mmt) from 2006/07 and 225 million (5.7 mmt) higher
than the previous record in 2005/06.

Yet, despite expected area, yield, and production gains in the United
States, year-end U.S. corn stocks will remain relatively tight at less
than 1 billion bushels (25.1 mmt). Thus, corn prices are expected to
rise to record levels in 2007/08 and remain strong for the foreseeable
future. This is because U.S. corn use is expected to increase rapidly as
the demand for corn for ethanol production grows.

**Ethanol Corn Use Expands Rapidly**

The U.S. Congress has mandated that U.S. gasoline consumption must
include 7.5 billion gallons of renewable fuel by calendar year 2012.
However, the current pace of plant construction and expansion indicates
that ethanol production capacity will exceed 7.5 billion gallons early
in the 2007/08 marketing year, 5 years faster than required by the
mandate **(Figure 6)**. Corn use for ethanol is being driven by
profitability in the ethanol sector which has contributed to the
unprecedented expansion in ethanol production capacity.

As of today, U.S. ethanol production capacity is about 6.2 billion
gallons annually. Plants under construction and plant expansions will
add an additional 6.4 billion gallons capacity during the next 18 to 24
months, bringing annual production capacity to 12.6 billion gallons
**(Figure 7)**.

U.S. corn use in 2007/08 will be dominated by growth in domestic use as
corn based ethanol production grows at a record pace. Total corn use,
including exports, is expected to increase 8 percent in 2007/08. Thus,
total use will approximately match total production **(Figure 8.)**.
Domestic corn use is expected to increase by 12 percent in 2007/08.
Higher corn use for ethanol will more than offset reductions in corn
feeding and exports during this period.

Corn ethanol use is projected at 2.15 billion bushels (54.6 mmt) for the
2006/07 marketing year, the equivalent of 5.8 billion gallons of
ethanol. Corn use for ethanol is projected at 3.4 billion bushels (86.4
mmt) for 2007/08, an increase of 58 percent from 2006/07, and the
equivalent of 9.3 billion gallons of ethanol.

Corn use for ethanol is expected to continue its rapid expansion through
2010 when ethanol production reaches about 7.5 percent of total U.S.
blended motor gasoline consumption **(Figure 9)**. At this point,
restrictions on the ability of the U.S. automobile fleet to use higher
ethanol blends limits ethanol demand growth to a rate consistent with
growth in gasoline use.

**Corn Ending Stocks Remain Relatively Tight and Prices Strong**

As growth in corn demand for ethanol production slows and yield gains
boost production, ending stocks will once again grow at modest rates.
However, during the next several years, projections for U.S. corn
supplies and use indicate a relatively tight stocks situation will
continue. Ending stocks are expected to increase very modestly in
2007/08, rising just 1 percent despite the large expected increase in
production.

The tight stocks situation is expected to keep upward pressure on corn
prices during the next few years. The season-average farm price is
projected to rise to \$3.40 per bushel (\$134/mt) in 2007/08, up \$0.35
(\$14/mt) from 2006/07 **(Figure 10.)**. Farm prices are expected to
remain at or above the mid \$3-per-bushel level over the next several
years as demand for biofuels support corn prices long-term even with
substantial expansion in corn production.

**Some Users Priced Out of Corn Market**

Domestic corn feeding is expected to decline modestly over the next few
years as ethanol production expands at a rapid pace **(Figure 11)**. The
decline will be partly offset by more wheat feeding and increased
feeding of distillers' grains, a co-product of ethanol production.
Growth in dairy, livestock, and poultry production is expected to be
limited as these sectors adjust to higher feed costs. However, after a
few years, dairy and meat production are expected to increase more
rapidly in response to increased product prices.

In the near term, the biggest decline in U.S. corn use is expected in
exports as ethanol producers outbid some foreign buyers for available
supplies. U.S. corn exports are expected to decline 8 percent in 2007/08
and fall again in 2008/09 as tighter supplies and higher prices limit
demand for U.S. corn **(Figure 12)**. Record crops in South America are
also expected to increase competition for U.S. exports during this
period.

**U.S. Corn Exports to Begin Recovery in 2010/11**

U.S. exports will begin to rise again in 2010/11, much as with domestic
corn feeding, as the growth in corn use for ethanol production slows and
yield gains boost supplies at a rate faster than demand growth. This
will allow stocks to build slightly and prices to ease modestly setting
the stage for resumed growth in corn exports and feeding at the
beginning of the next decade.

**World Coarse Grain Production Responds to Strong Demand and Higher
Prices**

The impact of higher prices is not limited to corn. Grain producers
around the world are responding to higher price prospects. USDA
currently projects 2007/08 global wheat production at 610 million tons,
up 3 percent from 2006/07. However, despite the expected increase in
production and slightly lower projected world consumption for 2007/08,
lower beginning stocks and a small expected increase in exports will
leave world ending stocks down 8 percent from 2006/07, the lowest level
in 30 years.

World coarse grain production is also expected to rise in 2007/08 as
producers respond globally to higher prices, especially for corn. USDA
projects 2007/08 global coarse grain production at a record 1.1 billion
tons, up 8 percent from 2006/07 with rising corn production in the
United States accounting for much of this increase. Corn production is
also expected to rise to record levels in Argentina and Brazil. Despite
higher world coarse grain output, lower beginning stocks and rising
consumption are expected to reduce world stocks 3 percent in 2007/08.
Global coarse grain ending stocks are expected to fall to their lowest
level since 1976/77.

**Remarkable Growth in China's Corn Output**

USDA currently projects China's combined wheat and coarse grains output
for 2007/08 nearly unchanged from 2006/07. China's wheat production, at
100 million tons, is projected down 3 percent while coarse grain
production, at 154 million tons, is projected up 2 percent. As in the
United States, China's coarse grain production is driven by expanding
corn production. USDA projects China's 2007/08 corn output at 146
million tons, up 2 percent from the current year as China's farmers also
respond to increased demand and higher prices.

Increases in China's corn production have been extraordinary in recent
years as crop area and yields have both risen. Based on USDA's current
estimates and 2007/08 forecast, China's corn output will average around
140 million tons per year for the period 2004/05 through 2007/08. This
compares to 114 million tons per year for the prior 4-year period. Thus,
in just 4 years, China added, on average, 25 million tons per year or a
total of 100 million tons to this country's available corn supplies, a
remarkable achievement made possible, in part, by favorable weather.

**China to Become Net Corn Importer**

USDA projects that China's domestic corn use will increase 3 percent in
2007/08, outpacing the rise in production **(Figure 13)**. Increased
domestic use has been driven by strong growth in industrial corn use
with feed use growing at a somewhat slower pace. China's corn exports
have become relatively stable in the past 2 years while stocks have been
drawn down. As a result, USDA expects that China will become a net
importer within the next 5 years as domestic feeding and industrial corn
use continue to grow and stocks continue to decline. The long-expected
shift of China from corn exporter to importer status has been
forestalled by China's remarkable production gains. Given the
unpredictability of weather, this may or may not continue.

**Record World Soybean Production in 2006/07**

Global soybean production reached a record 235 million tons in 2006/07,
up almost 15 million tons from the previous record set in 2004/05.
Production increases were reported in most of the major producing
countries. Planted area in Brazil declined for the second consecutive
year as producers reacted to financial difficulties, previous droughts,
higher input costs, and relatively low prices at planting time. In
Argentina, increased planted area partially offset area reductions in
Brazil. This in combination with excellent weather in Brazil, Argentina,
and Paraguay, resulted in a record South American soybean crop. South
American soybean production increased 10 percent, or 10 million tons. In
the United States, higher planted area and good yields also produced a
record crop of 87 million tons. While planted area in China was down
slightly, good yields produced a crop just slightly below the prior
year.

**Global Soybean Production to Decline in 2007/08**

As with corn, the world oilseeds outlook for 2007/08 and beyond will be
strongly influenced by the expanding use of agricultural commodities as
a source of energy. This year, both corn and soybean prices have risen
sharply. In the United States, the rapid rise in the use of corn to
produce ethanol has caused corn prices to increase relatively more,
leading to an unprecedented shift in planted acres from soybeans to
corn. This past spring, U.S soybean producers indicated plans to reduce
planted area by 11 percent, or 8.4 million acres **(Figure 14)**. In
addition, the expanded use of biodiesel around the world, especially in
Europe and the United States, is having a dramatic impact on global
vegetable oil markets. As a result, soybean and other vegetable prices
have risen sharply.

Led by a projected 14 percent (12 million ton) decrease in U.S. soybean
production, global soybean production is projected to decline 4.3
percent in 2007/08. With the exception of the drought year in 2003/04,
this is the first year-to-year decline in more than a decade **(Figure
15)**. This decline will more than offset modest gains for cottonseed,
rapeseed, and sunflowerseed. Soybean planted area is expected to
increase slightly in Brazil as higher prices partly offset grower
concerns about unfavorable exchange rates. Production for Brazil likely
will increase modestly based on higher planted area and trend yields.
Argentine soybean area and production also is expected to increase
slightly, despite strong corn prices.

**World Soybean Trade in Transition**

Since 2001, world trade has increased 37 percent and imports by China,
the world's leading soybean importer, have accounted for all of the
increase including offsetting a small decline in the rest of the world.
In only 6 years, China's soybean imports have increased by 24 million
tons, reflecting a sharp growth in protein meal consumption. China now
accounts for almost one-half of global soybean imports **(Figure 16)**.

Despite a relatively good soybean crop, China is expected to import a
record 30 million tons this marketing year, as protein and vegetable oil
demand continues to grow. How will the world continue to satisfy this
growing demand **(Figure 17)**? Brazil and Argentina are expected to
provide the answer. Since 2001, Brazil and Argentina combined have
increased output of soybeans by 47 percent to a projected 108 million
tons for 2007/08. Each country will have added about 17 million tons of
production over that time period. Without the expansion in South America
that coincided with the expansion in world soybean imports, especially
in China, prices would have risen even more sharply and growth in
consumption would have been much less.

**China Soybean Imports to Continue Rising**

Global protein meal consumption is expected to increase almost 4 percent
in 2007/08, led by gains for soybean meal consumption. Once again, China
will lead the growth with an expected 9 percent increase in soybean meal
consumption. Although this figure may seem high, lower production of
other oilseeds will shift the burden to soybean meal to meet a projected
4 percent increase in total protein consumption in 2007/08.

For China, slightly lower planted soybean area (due to increases for
corn) and average yields are expected to result in a 0.6 million ton
decline in production in 2007/08 to 15.6 million tons. With total
oilseed production projected down 2 percent, China's imports are
expected to rise once again to meet expanding vegetable oil and protein
needs. China is expected to import a record 34.5 million tons of
soybeans in the 2007/08 marketing year. Continuing the trend of recent
years, China will account for 78 percent of the projected increase in
world soybean trade, and its dependence on foreign sources for soybeans
will approach 70 percent **(Figure 18)**.

**Industrial Use of Vegetable Oil Rising**

Global vegetable oil consumption will increase about 4 percent this
year. Much of the increase reflects higher industrial use in the
European Union (EU) where growth has exceeded 10 percent in each of the
past 3 years **(Figure 19)**. Bio-diesel consumption in the EU is
projected to reach 7 percent of global vegetable oil production in
2007/08. The phenomenal growth in EU vegetable oil consumption is
playing a major role in pushing global vegetable oil prices to higher
levels. The U.S. biodiesel market is also growing rapidly, increasing
from virtually nothing just 5 years ago, to consuming a projected 17
percent of domestic soybean oil production in 2007/08 **(Figure 20)**.

In addition, China's per capita consumption of vegetable oil has
increased as incomes have risen, and this trend is expected to continue.
Overall, China's vegetable oil consumption will grow about 4 percent
this year and account for about 17 percent of the global increase.
However, the increased consumption will come at a higher cost as
industrialized countries like the EU and the United States expand their
use of vegetable oils for industrial purposes**.** With China depending
on foreign sources for about 90 percent of its vegetable oil supply
**(Figure 21)**, expanding industrial use of vegetable oils around the
world will significantly impact the price that China and other importing
countries must pay. A clear indication of this impact is that soybean
oil prices have risen nearly 60 percent in the past 18 months despite
record U.S. soybean oil stocks **(Figures 22 and 23)**. This year the
average U.S. soybean price will rise 11 percent from 2005/06 and likely
increase another 13 percent in 2007/08. The impact of growing bioenergy
use on crop prices is clearly dramatic.

**Global Vegetable Oil Prices to Continue Rising**

Global vegetable oil consumption is projected to increase 4 percent in
2007/08. This will be led by soybean and palm oils. China and EU are
leading the growth, but for different reasons. Growth in China is due to
increased use for human consumption while the EU increase is primarily
due to increased biodiesel use. As global industrial use of vegetable
oil rises to meet energy demands, vegetable oil price patterns will
continue to reflect diesel and petroleum prices.

Now, as global energy markets consume an increasing share of crops,
South America, especially Brazil, is expected to respond by cultivating
additional cropland to meet the growing global demand for vegetable oil
and protein. Continued strong commodity prices will be required to
stimulate expanded production. Clearly, such prices are likely given the
expanding role of bio-energy in the agricultural sector.

**World and U.S. Cotton Markets Dependent on Demand by China**

The U.S. and world cotton outlook for 2007/08 is driven to a large
extent by China's import demand. In recent years, world cotton
consumption has increased sharply due to strong world economic growth
and competitive cotton prices relative to synthetic fibers. In addition,
the liberalization of quotas on textile trade which came to fruition in
January 2005 under the World Trade Organization's (WTO) Agreement on
Textiles and Clothing (ATC) benefited countries whose textile exports
had previously been restricted -- especially China, India, and Pakistan.

World cotton production has kept pace with consumption growth, as better
technology, especially the use of genetically engineered seeds, has
raised yields and lowered production costs in several countries, notably
China, India, and the United States, which are the world's three largest
cotton producers. At the same time, the persistence of high world
supplies relative to use has held world cotton prices relatively flat,
in contrast to the recent higher prices for corn, other grains, and
oilseeds.

China is the world's largest producer, consumer, and importer of cotton.
Prospects for China's imports -- which have ranged from a low of 1.4
million tons to a high of 4.2 million tons during the past four seasons
-- dominate the world cotton outlook. China's import demand is an
especially important factor in the U.S. cotton outlook because the
United States is the world's largest cotton exporter and roughly half
may be shipped to China.

**Higher Corn Prices Reduce 2007 U.S. Cotton Planted Area and
Production**

USDA's March survey of cotton planting intentions showed prospective
area down about 20 percent from last year. This would be the lowest U.S.
cotton planted area since 1989. As with soybeans, the impact of
renewable fuels and sharply higher corn prices are largely responsible
for the year-to-year reduction in cotton area **(Figure 24)**. Assuming
normal weather conditions, U.S. production is forecast at 4.1 million
tons, down 13 percent from the 2006 crop.

**U.S. Cotton Supplies Up Despite Lower Production**

Despite lower production, U.S. cotton supplies are likely to rise in
2007/08 due to much higher beginning stocks. U.S. stocks accumulated
during 2006/07 due to declines in both domestic mill use and exports.
The resulting stocks of about 2.1 million tons constitute the largest
U.S. stock level in more than 40 years

**U.S. Export Situation and Outlook**

Domestic consumption of cotton in the United States has declined sharply
in recent years with the loss of most of its domestic apparel industry
to foreign countries. Currently, nearly all of the cotton spun in the
United States is shipped to Mexico, Central America, or the Caribbean
region in the form of yarn or other intermediate products for final
processing. With domestic use now accounting for one-fourth or less of
total U.S. cotton disappearance, the U.S. cotton outlook is highly
dependent on the export market.

In 2006/07, U.S. exports have dropped sharply from the previous year
largely because of reduced imports by China. While China's supply-demand
situation is uncertain, it appears that imports this season have been
lower because of: (1) larger-than-average stocks which accumulated
during the 2005/06 marketing year; and (2) government polices which have
placed stricter controls on cotton imports in order to encourage the use
of domestically produced cotton.

It also should be noted that the United States has lost market share
this marketing year in China due to: (1) the emergence of exportable
surpluses in India **(Figure 25)**; and (2) the termination of the Step
2 Program. Large crops produced in India for 2004 through 2006 generated
significantly larger exportable supplies, and India became a major
source of Chinese imports in 2006/07. Also, the U.S. Step 2 Program was
eliminated last August in compliance with the WTO ruling in the case
brought by Brazil. With the loss of Step 2 payments, U.S. cotton was not
competitive with Indian and some other world cotton growths until late
in the season.

For 2007/08, China's cotton production is projected to be about the same
as last season's 6.7 million tons. With stable production and
consumption expected to rise 8 percent, China's import requirements are
forecast to rise nearly 45 percent, reaching 3.7 million tons.

Production increases in countries other than the United States and China
will raise production slightly, offsetting the projected decrease in the
U.S. crop. However, stocks in these countries are being drawn down in
the 2006/07 season. Thus, exportable supplies outside the United States
are not expected to increase. In the U.S., however, large beginning
stocks will give the U.S. an early-season supply advantage. Therefore,
U.S. cotton exports are projected to rise nearly one-third, to 3.8
million tons in 2007/08 due to a combination of strong foreign import
demand, especially here in China, and large U.S. exportable supplies
**(Figure 26)**.

**How Does WAOB Do Its Job?**

The conference organizers asked for a brief description of how the World
Agricultural Outlook Board develops the global supply and demand
information it publishes.

The Board is a unit of USDA's Office of the Chief Economist. WAOB's
primary mission is to coordinate, review, and approve USDA's monthly
*WASDE* report. The *WASDE* report provides USDA's comprehensive
forecasts of supply and demand for major U.S. and foreign crops and U.S.
livestock. It is WAOB's responsibility to assure that USDA's analysis is
accurate, timely, and objective; and promptly delivered to farmers and
ranchers, policy makers, and the public. The monthly *WASDE* report sets
the official numbers for more than 100 other USDA outlook-oriented
reports released each year by the Economic Research Service and the
Foreign Agricultural Service.

Preparation of the *WASDE* report is a department-wide effort involving
hundreds of USDA analysts. **Figure 27** illustrates the organizational
structure of USDA's situation and outlook program. The Secretary of
Agriculture authorized the Chairman of the World Agricultural Outlook
Board to establish Interagency Commodity Estimates Committees (ICECs)
for the purpose of bringing together analysts from key agencies to
develop the U.S. government's ***official*** supply and demand estimates
for major agricultural crops. The Board accomplishes this by building a
consensus among participating agencies with respect to any given
estimate or forecast. It is important to note that this process must be
free of specific agency agenda or political biases.

The flow of information through USDA's economic information system is
shown in **Figure 28**. To bring all relevant information together on a
monthly basis, the Board chairs the ICECs that are comprised of
representatives from several key USDA agencies. There are separate ICECs
for wheat, rice, feed grains, oilseeds, cotton, sugar, meat animals,
poultry, and dairy. These committees compile and interpret information
from USDA and other domestic and foreign official sources to produce the
monthly *WASDE* report.

The ICECs rely on attaché reports provided by the Foreign Agricultural
Service (FAS); economic analysis provided by the Economic Research
Service (ERS); market information provided by the Agricultural Marketing
Service (AMS); domestic crop, livestock, and stocks estimates provided
by the National Agricultural Statistics Service (NASS); domestic policy
analysis provided by the Farm Service Agency (FSA); and weather analysis
provided by the Joint Agricultural Weather Facility**.**

The primary information sources used by the ICECs include attaché
reports, official country reports, travel reports, economic analyses,
remote sensing, and weather analyses. It should be noted that continuous
global weather monitoring is critical to assessing prospects for crop
and livestock production and prices. WAOB manages the Joint Agricultural
Weather Facility (JAWF) which is staffed by meteorologists from the
National Oceanic and Atmospheric Administration of the U.S. Department
of Commerce and agricultural meteorologists from USDA. JAWF monitors the
weather and assesses its likely impact on crops around the world. JAWF
meteorologists review current reports daily from nearly 8,000 weather
stations worldwide, weather satellites, and other sources to provide an
early warning of conditions affecting agricultural production around the
globe.

The *WASDE* report is prepared in secured, "lock-up" conditions to
assure its integrity and prevent premature release of market sensitive
information. Once analysts enter the secured area, they are unable to
communicate with the outside world. Doors and windows are shut and
locked, and all means of communication out of the facility are blocked
until the report is released at 8:30 a.m. Eastern Time, about 2 hours
before major U.S. commodity markets open.

The World Board relies on the latest computer-based techniques to
gather, analyze, and deliver forecasts rapidly to the public. At the
scheduled release time, reports are issued electronically, making them
immediately and freely available to anyone in the world who has access
to the Internet.

**Concluding Remarks**

World commodity markets thrive on information and transparency for
efficient decision-making and pricing. As world trade has expanded, and
producers and consumers in the United States and China have become
increasingly dependent on developments in foreign countries, this has
become even more important.

Three years ago when you gave me the privilege of participating in this
important conference, I encouraged the government of China to publish
grain, oilseed, and cotton stocks estimates similar to those published
by the government of the United States. USDA applauds the progress China
has made in recent years in making more commodity information available
to world markets. However, world markets need even more information from
China.

At present, China does not have an organization comparable to the World
Agricultural Outlook Board. Thus, China has no agency which is
responsible for assembling China's ***official*** commodity supply and
demand information in one place. Thus, supply and demand numbers are
released by various organizations in China in piecemeal fashion and may
not balance. This, in turn, creates uncertainty in world markets.
Without a clearance mechanism in the United States such as the World
Agricultural Outlook Board, we too would have a similar problem.

From my perspective, it would seem more appropriate for the rest of the
world to have the benefit of official balance sheets produced by China
rather than relying solely on market speculation prepared by foreign
analysts. Not only would improved information benefit the rest of the
world, it also would benefit China's agricultural sector and consumers.
On the one hand, improved market information and natural market forces
would help reduce burdensome commodity surpluses in China that result in
low market prices and high government costs. On the other hand, improved
information and natural market forces would help avoid critical
shortages in China that alarm consumers and result in inflationary price
pressures. In short, more commodity information from China would lead to
better business decisions and greater price stability both here and
worldwide.

Again, I wish to thank you for giving me the honor of speaking here
again.

**Appendix A**

  ---------------------------------------------------------------------------
  Table 1. Corn                                                  
  supply and use                                                 
  for China,                                                     
  United States,                                                 
  and the World                                                  
  -------------- ----------- ----------- ----------- ----------- ------------
  Item           2003/2004   2004/2005   2005/2006   2006/2007   2007/2008
                                                     estimate    projection

                                                                 

  **China**                                                      

                 *Million                                        
                 hectares*                                       

  Area harvested 24.07       25.45       26.36       27.00       27.60

                 *Tons per                                       
                 hectare*                                        

  Yield          4.81        5.12        5.29        5.30        5.29

                 *Million                                        
                 tons*                                           

  Beginning      64.97       44.85       36.56       35.26       30.86
  Stocks                                                         

  Production     115.83      130.29      139.37      143.00      146.00

  Imports        0.00        0.00        0.06        0.10        0.10

  Total Supply   180.81      175.14      175.98      178.36      176.96

                                                                 

  Feed Use       97.00       98.00       101.00      103.00      105.00

  FSI Use        31.40       33.00       36.00       40.00       43.00

  Domestic use   128.40      131.00      137.00      143.00      148.00

  Exports        7.55        7.59        3.73        4.50        3.00

  Total Use      135.95      138.59      140.73      147.50      151.00

                                                                 

  Ending Stocks  44.85       36.56       35.26       30.86       25.96

                 *Percent*                                       

  Stocks/Use     32.99       26.38       25.05       20.92       17.19
  Ratio                                                          

                                                                 

  **United                                                       
  States**                                                       

                 *Million                                        
                 hectares*                                       

  Area harvested 28.71       29.80       30.40       28.59       33.56

                 *Tons per                                       
                 hectare*                                        

  Yield          8.93        10.06       9.29        9.36        9.43

                 *Million                                        
                 tons*                                           

  Beginning      27.60       24.34       53.70       49.97       25.07
  Stocks                                                         

  Production     256.28      299.91      282.31      267.60      316.50

  Imports        0.36        0.28        0.23        0.25        0.38

  Total Supply   284.24      324.53      336.24      317.82      341.95

                                                                 

  Feed Use       147.20      156.43      156.00      148.60      144.79

  FSI Use        64.45       68.22       75.73       89.54       121.67

  Domestic use   211.64      224.65      231.72      238.14      266.46

  Exports        48.26       46.18       54.55       54.61       50.17

  Total Use      259.90      270.83      286.27      292.75      316.63

                                                                 

  Ending Stocks  24.34       53.70       49.97       25.07       25.33

                 *Percent*                                       

  Stocks/Use     9.36        19.83       17.46       8.56        8.00
  Ratio                                                          

                                                                 
  ---------------------------------------------------------------------------

**Appendix A**

  ---------------------------------------------------------------------------
  Table 1. Corn                                                  
  supply and use                                                 
  for China,                                                     
  United States,                                                 
  and the World                                                  
  \-- Continued                                                  
  -------------- ----------- ----------- ----------- ----------- ------------
  Item           2003/2004   2004/2005   2005/2006   2006/2007   2007/2008
                                                     estimate    projection

                                                                 

  **World**                                                      

                 *Million                                        
                 hectares*                                       

  Area harvested 142.03      144.92      145.60      148.48      158.69

                 *Tons per                                       
                 hectare*                                        

  Yield          4.41        4.93        4.78        4.71        4.84

                 *Million                                        
                 tons*                                           

  Beginning      125.59      103.89      130.67      122.42      94.68
  Stocks                                                         

  Production     627.03      714.49      695.94      699.32      767.96

  Imports        76.38       76.60       79.24       83.25       82.33

  Total Supply   828.99      894.98      905.85      904.99      944.97

                                                                 

  Feed Use       444.96      472.95      475.72      475.98      484.13

  FSI Use        202.87      213.72      226.46      247.41      285.92

  Domestic use   647.83      686.67      702.19      723.39      770.05

  Exports        77.28       77.64       81.24       86.93       83.11

  Total Use      725.10      764.31      783.42      810.32      853.16

                                                                 

  Ending Stocks  103.89      130.67      122.42      94.68       91.80

                 *Percent*                                       

  Stocks/Use     14.33       17.10       15.63       11.68       10.76
  Ratio                                                          
  ---------------------------------------------------------------------------

**Appendix A**

  ------------------ ------------ ----------- ----------- ----------- ------------
  Table 2. Soybean                                                    
  supply and use for                                                  
  China, United                                                       
  States, and the                                                     
  World                                                               

  Item               2003/2004    2004/2005   2005/2006   2006/2007   2007/2008
                                                          estimate    projection

                                                                      

  **China**                                                           

                     *Million                                         
                     hectares*                                        

  Area harvested     9.31         9.59        9.59        9.30        8.80

                     *Kilograms                                       
                     per hectare*                                     

  Yield              1,653        1,814       1,705       1,742       1,773

                     *Million                                         
                     tons*                                            

  Beginning Stocks   4.47         2.10        4.70        4.47        3.43

  Production         15.39        17.40       16.35       16.20       15.60

  Imports            16.93        25.80       28.32       30.00       34.50

  Total Supply       36.79        45.30       49.37       50.67       53.53

                                                                      

  Crush              25.44        30.36       34.50       36.70       39.70

  Food Use           7.21         8.00        8.30        8.45        8.55

  Other Domestic Use 1.73         1.85        1.74        1.70        1.75

  Total Domestic Use 34.38        40.21       44.54       46.85       50.00

  Exports            0.32         0.39        0.35        0.39        0.45

  Total Use          34.69        40.60       44.89       47.24       50.45

                                                                      

  Ending Stocks      2.10         4.70        4.47        3.43        3.08

                     *Percent*                                        

  Stocks/Use Ratio   6.05         11.58       9.96        7.27        6.11

                                                                      

  **United States**                                                   

                     *Million                                         
                     hectares*                                        

  Area harvested     29.33        29.93       28.83       30.19       26.75

                     Kilograms                                        
                     per hectare                                      

  Yield              2,277        2,840       2,891       2,874       2,793

                     *Million                                         
                     tons*                                            

  Beginning Stocks   4.85         3.06        6.96        12.23       16.59

  Production         66.78        85.01       83.37       86.77       74.71

  Imports            0.15         0.15        0.09        0.11        0.11

  Total Supply       71.78        88.22       90.42       99.11       91.41

                                                                      

  Crush              41.63        46.16       47.32       48.17       48.72

  Food Use           0.00         0.00        0.00        0.00        0.00

  Other Domestic Use 2.96         5.24        5.09        4.95        4.60

  Total Domestic Use 44.60        51.40       52.41       53.12       53.31

  Exports            24.13        29.86       25.78       29.39       29.39

  Total Use          68.72        81.26       78.19       82.52       82.71

                                                                      

  Ending Stocks      3.06         6.96        12.23       16.59       8.70

                     *Percent*                                        

  Stocks/Use Ratio   4.45         8.56        15.64       20.11       10.52
  ------------------ ------------ ----------- ----------- ----------- ------------

**Appendix A**

  ------------------ ------------ ----------- ----------- ----------- ------------
  Table 2. Soybean                                                    
  supply and use for                                                  
  China, United                                                       
  States, and the                                                     
  World \--                                                           
  Continued                                                           

  Item               2003/2004    2004/2005   2005/2006   2006/2007   2007/2008
                                                          estimate    projection

                                                                      

  **World**                                                           

                     *Million                                         
                     hectares*                                        

  Area harvested     88.22        93.06       92.54       93.95       91.97

                     *Kilograms                                       
                     per hectare*                                     

  Yield              2,114        2,318       2,383       2,506       2,450

                     *Million                                         
                     tons*                                            

  Beginning Stocks   43.62        38.75       48.44       53.94       63.60

  Production         186.53       215.72      220.56      235.41      225.33

  Imports            54.05        63.73       64.43       69.07       74.89

  Total Supply       284.19       318.21      333.42      358.42      363.82

                                                                      

  Crush              163.73       175.68      185.30      194.17      203.43

  Food Use           12.08        13.01       13.67       14.04       14.41

  Other Domestic Use 13.66        16.45       16.29       16.54       16.44

  Total Domestic Use 189.46       205.14      215.26      224.75      234.28

  Exports            55.98        64.63       64.22       70.07       75.53

  Total Use          245.44       269.77      279.48      294.82      309.82

                                                                      

  Ending Stocks      38.75        48.44       53.94       63.60       54.00

                     *Percent*                                        

  Stocks/Use Ratio   15.79        17.96       19.30       21.57       17.43
  ------------------ ------------ ----------- ----------- ----------- ------------

**Appendix A**

  ---------------- ------------ ----------- ----------- ----------- ------------
  Table 3. Cotton                                                   
  supply and use                                                    
  for China,                                                        
  United States,                                                    
  and the World                                                     

  Item             2003/2004    2004/2005   2005/2006   2006/2007   2007/2008
                                                        estimate    projection

                                                                    

  **China**                                                         

                   *Million                                         
                   hectares*                                        

  Area harvested   5.11         5.69        5.06        5.40        5.50

                   *Kilograms                                       
                   per hectare*                                     

  Yield            950          1,110       1,127       1,246       1,227

                   *Million                                         
                   tons*                                            

  Beginning Stocks 3.27         3.26        2.84        3.70        3.18

  Production       4.86         6.31        5.70        6.73        6.75

  Imports          1.92         1.39        4.20        2.56        3.70

  Total Supply     10.04        10.96       12.75       12.99       13.63

                                                                    

  Domestic Use     6.97         8.38        9.80        10.89       11.76

  Loss             -0.22        -0.27       -0.76       -1.09       -1.31

  Exports          0.04         0.01        0.01        0.02        0.01

  Total Use        6.79         8.12        9.04        9.81        10.46

                                                                    

  Ending Stocks    3.26         2.84        3.70        3.18        3.16

                   *Percent*                                        

  Stocks/Use Ratio 47.98        35.04       40.95       32.36       30.25

                                                                    

  **United                                                          
  States**                                                          

                   *Million                                         
                   hectares*                                        

  Area harvested   4.86         5.28        5.59        5.15        4.45

                   Kilograms                                        
                   per hectare                                      

  Yield            818          958         931         912         919

                   *Million                                         
                   tons*                                            

  Beginning Stocks 1.17         0.75        1.20        1.32        2.13

  Production       3.97         5.06        5.20        4.70        4.09

  Imports          0.01         0.01        0.01        0.00        0.00

  Total Supply     5.16         5.82        6.40        6.02        6.23

                                                                    

  Domestic Use     1.36         1.46        1.28        1.07        0.96

  Loss             0.05         0.02        -0.12       -0.01       0.00

  Exports          3.00         3.14        3.93        2.83        3.81

  Total Use        4.41         4.62        5.09        3.89        4.77

                                                                    

  Ending Stocks    0.75         1.20        1.32        2.13        1.46

                   *Percent*                                        

  Stocks/Use Ratio 17.05        25.88       25.90       54.89       30.57

                                                                    
  ---------------- ------------ ----------- ----------- ----------- ------------

**Appendix A**

  ---------------- ------------ ----------- ----------- ----------- ------------
  Table 3. Cotton                                                   
  supply and use                                                    
  for China,                                                        
  United States,                                                    
  and the World                                                     
  \-- continued                                                     

  Item             2003/2004    2004/2005   2005/2006   2006/2007   2007/2008
                                                        estimate    projection

                                                                    

  **World**                                                         

                   *Million                                         
                   hectares*                                        

  Area harvested   32.13        35.49       34.42       34.22       34.03

                   *Kilograms                                       
                   per hectare*                                     

  Yield            646          737         723         743         741

                   *Million                                         
                   tons*                                            

  Beginning Stocks 9.88         9.64        12.00       12.33       12.28

  Production       20.76        26.15       24.89       25.41       25.23

  Imports          7.41         7.28        9.59        8.23        9.17

  Total Supply     38.04        43.06       46.48       45.97       46.68

                                                                    

  Domestic Use     21.34        23.70       25.29       26.68       27.74

  Loss             -0.17        -0.24       -0.86       -1.06       -1.27

  Exports          7.23         7.61        9.71        8.08        9.05

  Total Use        28.41        31.07       34.14       33.69       35.52

                                                                    

  Ending Stocks    9.64         12.00       12.33       12.28       11.15

                   *Percent*                                        

  Stocks/Use Ratio 33.93        38.61       36.12       36.44       31.40
  ---------------- ------------ ----------- ----------- ----------- ------------

**Appendix B**

EMBED PowerPoint.Slide.8
![](media/image1.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 1. Oil prices, refinery acquisition price.

![](media/image2.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 2. World real growth in gross domestic product.

**Appendix B**

![](media/image3.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 3. China oil consumption and oil prices.

![](media/image4.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 4. U.S. corn planted area.

**Appendix B**

![](media/image5.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 5. U.S. corn production, 1995-2007.

![](media/image6.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 6. U.S. ethanol refineries.

**Appendix B**

![](media/image7.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 7. U.S. ethanol production capacity, annual capacity by month.

![](media/image8.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 8. U.S. corn production and total use, 1995/96 - 2007/08.

**Appendix B**

![](media/image9.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 9. U.S. corn used in ethanol production, 1995/96 - 2007/08.

![](media/image10.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 10. U.S. corn ending stocks and farm price, 1995/96 - 2007/08.

**Appendix B**

![](media/image11.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 11. U.S. domestic corn use, 1995/96 - 2007/08.

![](media/image12.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 12. U.S. corn exports, 1995/96 - 2007/08.

**Appendix B**

![](media/image13.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 13. China corn production and consumption, 1995 - 2007.

![](media/image14.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 14. U.S. planted area, corn and soybeans, 1991 - 2010.

**Appendix B**

![](media/image15.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 15. Soybean production trends, 1991 - 2010.

![](media/image16.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 16. China and global soybean imports, 1991 - 2007.

**Appendix B**

![](media/image17.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 17. China soybean imports by source, 1991 - 2006.

![](media/image18.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 18. China soybean import dependence expected to increase.

**Appendix B**

![](media/image19.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 19. EU industrial use of vegetable oil, 2001 - 2007.

![](media/image20.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 20. U.S. biodeisel production, 2000/01 - 2010/11.

**Appendix B**

![](media/image21.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 21. China soybean oil consumption, 1991 - 2016.

![](media/image22.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 22. Soybean oil futures prices, December 2007 contract.

**Appendix B**

![](media/image23.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 23. Record U.S. soybean oil stocks.

![](media/image24.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 24. U.S. cotton planted area and production, 2003 - 2007.

**Appendix B**

![](media/image25.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 25. India cotton production and exportable supply, 2003 - 2007.

![](media/image26.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 26. China cotton imports and U.S. exports, 2003 - 2007.

**Appendix B**

![](media/image27.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 27. USDA situation and outlook organizational structure.

![](media/image28.wmf){width="4.995833333333334in"
height="3.751388888888889in"}

Fig. 28. USDA's economic information system.

[^1]: USDA's current 2007/08 supply and demand forecasts in metric units
    for corn, soybeans, and cotton for China, the United States, and the
    world are shown in Appendix A, Tables 1, 2, and 3, respectively.
    Source: *World Agricultural Supply and Demand Estimates* report,
    June 12, 2007. Figures 1-28 are presented in Appendix B.