This follows the baseline projections from USDA released earlier in the month. At 227.0 million acres, the combined acreage of these crops will be - if these projections are accurate - almost 8 million acres larger than last year and over 2 million acres above the recent high-water mark in 2008. Add cotton to the mix, and the combined 4-crop acreage is almost 10 million acres larger than a year ago and well over 5 million acres larger than in 2008.

Clearly, expectations are for a fairly substantial acreage response to current high crop prices. However, the grain inventories picture is not expected to change very much. With trend line-yields of 161.7 bushels per acre for corn, total production for 2011 is projected at 13.730 billion bushels. Compared with projected use of 13.560 billion bushels (only fractionally higher than this year), this level of production will be sufficient to increase corn stocks - but only a little.

The projected 2011/12 ending stocks level of 865 million bushels works out to a stock-to-use ratio (S/U) of 6.4 percent - up from a 5 percent projection for the current marketing year but still historically very small. For soybeans, the situation is similar. Projected 2011 production of 3.345 billion bushels does exceed projected use but will only marginally raise carryover. Wheat carryover for 2011/12 is projected to contract modestly as a high level of abandonment offsets last fall's fairly substantial increase in winter wheat planting. As grain and oilseed supplies remain tight, prices will remain well-supported.

Of course, the 2011/12 marketing year hasn't even started yet, so price projections at this point are highly uncertain. But it is worth noting that USDA's 2011/12 corn, soybean, and wheat marketing year average price projections of $5.60, $13.00, and $7.50 per bushel, respectively, are actually higher than their current 2010/11 price projections for those crops. The idea that grain prices could be higher next year than they are this year - with ending stocks projected to rise - is a tough one to accept, but it is entirely consistent with current supply and use projections.

Not surprisingly, as grain supplies remain stubbornly tight despite record or near-record production, meat production is forecast to be flat. Beef production is expected to decrease 1.5% percent in 2011 as the shrinking supply of cattle works its way through the chain. Pork and broiler production are expected to increase, though only by 0.4 percent and 1.1 percent, respectively. Strong exports are also forecast for beef and pork, rising by 2.0 percent and 10.6 percent, respectively, while broiler exports are expected to decline by 1.8 percent in the coming year. Flat production and strong exports clearly suggest higher prices. For 2011, USDA forecasts about a 10 percent increase in fed steer prices compared with 2010 and about an 8 percent increase in market hog prices.

John Michael Riley, Ph.D. is assistant extension professor for the Department of Agricultural Economics at Mississippi State University. 
John D. Anderson, Ph.D. is a livestock economist for the American Farm Bureau Federation. This column originally appeared in the Livestock Marketing Information Center weekly newsletter.