U.S. agricultural commodities look strong for 2008 and for 2009, but by 2010 the commodity market could be dicey.

A potential culprit in this reversing economic outlook might be Conservation Reserve Program land converted back to crop production.

“By 2010, we could see 6 million acres out of CRP with the biggest take coming out of North Dakota and South Dakota,” said Al Kluis of Kluis Commodities, “but less CRP acres isn’t the only cause and effect coming into play. More likely is that world production of our major grain commodities will have increased to the extent that the supply-demand scenario will essentially be back in balance.”

Why will global supply of commodities surge by 2010?

Essentially because of the same factors that are spiking world agriculture today. More land coming into production, better management producing more yields and by 2010 perhaps a significant breakthrough on trait technologies giving crops both more drought and cold-weather tolerance.

Wheat futures had just set a new high of $15.53 the day Kluis spoke. He was matter of fact about the exploding wheat situation.

“We need to find 2 million more acres of hard red spring wheat and that means taking wheat prices at least $2 above soybean prices to get there. We’re talking 4 million acres less corn this year, down to about 90 million planted acres. On soybeans the trade is talking 6 million more acres for about 69 million acres soybeans."

Kluis sees significant increases in both soybeans and wheat acres without necessarily causing environmental concerns. “Our farmers are good stewards of the land. They know keeping a land productive and environmentally secure is a long-term project. Many also know that wheat following soybeans is a good crop sequence. So winter wheat next fall could be a big item across North Dakota, South Dakota and here in Minnesota as well. In the soft red wheat belt, we’ll be seeing even more double cropping soybeans into standing wheat stubble. Both these scenarios minimize environmental issues while giving producers a stronger marketing opportunity for both crops.”

Yields continue an ongoing struggle with soybeans. Averaging about 43 bushels per acre for 2007, Kluis said growers just haven’t been able to ramp up yields significantly. That continues to be a factor in soybean carryover. If 70 million acres get planted to soybeans in 2008, and the average yield stays at 42 bushels, total production would be about 2.9 billion bushels. Total usage for the 2008 crop is projected at 3 billion bushels, which tightens carryover even more.