ANALYSIS - USDA's recently released Crop Production Report and World Agricultural Supply and Demand reports were, for the most part, as expected, but Indiana's reduced corn yield estimate surprised more than a few, writes Sarah Mikesell, TheCropSite senior editor.
According to Darrel Good, University of Illinois agricultural economist, the crop production and supply and demand forecasts were generally in the range of expectations, although the expected size of the soybean crop was smaller than generally expected. Soybean prices moved higher following the release of the reports, but corn and wheat prices were a little softer.
The reports confirmed that substantial rationing of corn and soybeans will be required in the year ahead, suggesting that prices will remain strong for an extended period to ensure the necessary rationing occurs.
Good said there is some chance that the forecasts of both the average corn yield and acreage harvested will decline in subsequent reports. New highs in both corn and soybean prices cannot be ruled out.
Greg Matli, deputy director of the USDA National Agricultural Statistics Service's Indiana field office, summarized the report during a panel discussion at the Indiana State Fairgrounds, which projects that the nation's farmers will produce 10.8 billion bushels of corn down 13 percent from last year due to the severe drought palguing the Midwest. Soybean production is forecast at 2.6 billion bushels, down 12 percent from last year.
The 2012 US corn crop is forecast at 10.779 billion bushels, reflecting a national average yield of 123.4 bushels per acre. The yield forecast is 23.8 bushels below last year’s average, 41.3 bushels below the record yield of 2009, and the lowest yield since 1995.
The crop forecast is 1.579 billion less than the 2011 crop and the smallest since 2006. Average yields in southern states are expected to be above those of a year ago, but most Corn Belt states are expected to have averages well below those of last year, with the exception of Minnesota.
For the current marketing year, the projection of both exports and ethanol use of corn were reduced by 50 million bushels, while the projection of other processing uses was reduced 15 million and the projection of imports was increased by 3 million.
September 1 stocks are now projected at 1.021 billion bushels, 118 million more than projected last month. For the upcoming marketing year, the small size of the expected crop resulted in smaller forecasts of consumption in all categories—feed and residual down 725 million, ethanol down 400 million, and exports down 300 million from last month’s projection.
These forecasts reflect year-over-year declines of 475 million, 500 million, and 250 million bushels, respectively. Year-ending stocks are projected at 650 million bushels, or 5.8 percent of projected consumption. The marketing year average farm price is projected in a range of $7.50 to $8.90 per bushel.
For the rest of the world, projections of the size of the upcoming European corn harvest was reduced by 155 million bushels and the expected size of the 2013 South American crop was increased by 236 million.
|August 2012 USDA Crop Production Report|
The 2012 US soybean crop is forecast at 2.692 billion bushels, reflecting a national average yield of 36.1 bushels per acre. The yield forecast is 5.4 bushels below last year’s average, 7.9 bushels below the record yield of 2009, and the lowest since 2003.
The crop forecast is 364 million smaller than last year’s crop and the smallest since 2007. The state-by-state yield pattern is expected to be similar to corn, equal to or above last year’s average in Southern states, down only 0.5 bushels in Minnesota, and down sharply in the rest of the Corn Belt.
For the current marketing year, the projection of US exports was increased by 10 million bushels and the projection of the domestic crush was increased by 15 million bushels. September 1 stocks are now projected at 145 million bushels, 25 million less than projected last month.
For the upcoming marketing year, a sizable reduction in consumption will be required. Year-over-year declines of 175 million bushels for the domestic crush and 250 million bushels for exports are projected. Year-ending stocks are projected at 115 million bushels, or 4.2 percent of projected use, and the marketing year average price is projected in a range of $15 to $17.
For the rest of the world, the largest forecast change was an additional 110 million bushel increase in the expected size of the 2013 Brazilian crop. That crop is forecast at 2.976 billion bushels, 24 percent larger than the drought reduced crop of 2012.
|August 2012 USDA Crop Production Report|
The US wheat crop is forecast at 2.268 billion bushels, 44 million larger than the July forecast, reflecting a national average yield of 46.5 bushels. The yield forecast is 0.9 bushels larger than last month’s forecast and 2.8 bushels above the 2011 average.
The production forecast is 269 million larger than the 2011 crop, reflecting a 189 million bushel increase in winter wheat production, a 35.5 million bushel increase in durum production, and a 44 million bushel increase in production of other spring wheat.
For the current marketing year, the projection of imports was increased by 10 million bushels and the projection of feed and residual use was increased by 20 million bushels.
Year-ending stocks are projected at 698 million bushels, 34 million above last month’s projection, and the marketing year average farm price is projected in a range of $7.60 to $9.00 per bushel.
For the rest of the world, only small changes were made in expected crop size, but the total was reduced from last month’s projection. The projection of world ending stocks was reduced by nearly three percent.
Indiana: Major Reduction in Corn Yield Expectations
USDA estimated Indiana's corn crop would produce 605 million bushels in 2012 compared to 839,500 million bushels in 2011. And 2012 yields are expected to average about 100 bushels per acre, a per-acre decrease of 46 bushels from 2011 and 57.4 bushels from Indiana's five-year average.
Soybeans are projected to yield 37 bushels per acre, down 8 bushels from last year and 9.7 bushels from the five-year average. Indiana's total production is expected at 184,630 million bushels compared to 238,050 million bushels in 2011.
"These are remarkably low numbers, especially on the corn," said Chris Hurt, Purdue Extension agricultural economist. "Indiana is the worst of the major production states in terms of corn production. We knew that early on. It started here and then spread to the west."
By the end of the first week of August, nearly three-fourths of the state's corn crop - 73 percent - and 53 percent of soybeans were in poor to very poor condition. Because of that, USDA estimates Indiana's 2012 corn crop will yield nearly 38 percent below trend yields.
"This is the worst departure from trend yields in Indiana in at least 75 years," said Bob Nielsen, Purdue Extension corn specialist.
That includes the 1988 corn crop, which was down 30 percent from the previous year. Soybeans were down 20 percent. This year, Indiana's soybean crop still has potential to recover some yield after widespread rains offered much-needed relief early this month, according to Purdue Extension soybean specialist Shaun Casteel.
"Beans are flexible, and there is a fair amount of growing season left," he said. "We've had some rainfall and more mild temperatures in early August, and if those continue, we can still make up ground."
Corn, on the other hand, isn't likely to improve much between now and what is all but certain to be an early harvest.
"We need to be prepared for an early harvest because not only was the crop planted early, but it also will mature even faster because of drought stress," Nielsen said.
Even with short corn and soybean crops, Hurt said growers could still find themselves in a profitable situation, depending on final yields and crop insurance coverage.
"We assume producers need bushels to have an income," he said. "Corn revenues are up 64 percent from what we expected in the spring and soybean revenues are up 24 percent. Some growers might have an opportunity to take advantage of the higher prices.
"Crop insurance will be another factor. We estimate that 65-75 percent of Indiana's corn and soybean acres are insured. Those compensation dollars will be very large this year."
Also key in final incomes will be growers' marketing and forward-contracting strategies and whether farms also include livestock, Hurt said.