The persistence of moderate to severe drought conditions in parts of Illinois, Iowa, and much of the southern Plains increases concerns about yield potential. As usual, forecasts of summer weather conditions are not consistent at this time.

Based on current conditions, however, it appears that the soybean prices need to be at a level to discourage a large increase in U.S. acreage in 2006.

The real problem is the underlying drought conditions.

Fundamentally, the increase in exports and export sales has been a supportive factor. Ideas that ethanol-driven demand for corn will continue to increase at a brisk pace and that U.S. corn acreage may decline modestly in 2006 also provide fundamental support. Dry weather has driven wheat prices higher and has raised concerns about the 2006 growing season for corn and other crops. Speculative demand for corn and other crops has also escalated, as evidenced by the daily tally of the net position of the fund traders.

That level of use is historically consistent and provides evidence that the size of the 2005 harvest has been accurately estimated.

The production intentions of hog producers will be of particular interest. The report will reveal whether producers' modest expansion plans have changed as a result of an extended period of relatively low feed prices.