PURDUE AG ECONOMIST: CORN YIELD PROJECTIONS DOWN, BUT NOT AS MUCH AS EXPECTED
Sep. 14, 2012
Source: Purdue University news release
U.S. corn and soybean yield projections decreased Wednesday (Sept. 12) as the nation's Corn Belt continues to suffer through the worst drought since at least 1956.
According to a U.S. Department of Agriculture Crop Production report, the nation's corn crop could be just 10.7 billion bushels, down less than 1 percent from the Aug. 10 report and 13 percent from 2011. Those numbers represent the smallest corn crop since 2006.
While the corn yield projections declined, Purdue Extension agricultural economist Chris Hurt said they didn't drop as much as expected compared with the August report.
"The surprise was on the corn market. Corn yields were not dropped very much - about six-tenths of a bushel per acre," Hurt said. "What we saw is that in the primary Midwest, especially Illinois, Iowa and Nebraska, the yields all came down some. But in the southern tier of states, we actually saw an increase in yields, so we kind of had an offset."
Soybean production was forecast at 2.63 billion bushels, down 2 percent since August and 14 percent from 2011. The projections are slightly less than what Hurt said markets anticipated.
Indiana and Ohio corn and soybean yield projections held steady from August to September. The USDA anticipated 605 million bushels of Indiana corn, down 28 percent from 2011. Indiana soybeans were projected at 184.6 million bushels, down 22 percent from 2011.
The USDA projected Ohio corn yields of 456.1 million bushels, down 10 percent from 2011. Ohio soybeans were expected to make 183.2 million bushels, down 15 percent from 2011.
Harold Watters, an Ohio State University Extension agronomy field specialist and coordinator of the university's Agronomic Crops Team, said that growers in Ohio would likely find corn to be slightly under the estimates, and soybeans to be slightly above estimates.
"I think corn will be three or four bushels under the projections," Watters said, noting that because of some "good rains in August, we're likely to be a bushel or two more per acre in soybeans" than projected.
Wednesday corn markets were bearish on the heels of the release of the USDA report, but soybean futures prices jumped. Cash corn prices for new crop ranged from $7.75 to $8 per bushel, while new crop-cash soybean prices averaged between $17 and $17.50 in Indiana.
Hurt said the report can give corn and soybean growers some insight for marketing the crops.
"As we think about marketing, there certainly are some differences between corn and soybeans," he said. "For corn, current bids into the storage season are relatively flat going across the fall and into the spring, without substantial increases or decreases. What that tells us is that storing corn still makes some sense if one believes corn prices can still rally and that there is limited concern about a major drop in prices.
"Soybeans are different because of the very large South American production. If they have a reasonable growing season, we're going to start seeing lower soybean prices by maybe January and especially February and March."
The strong cash and futures prices will help some grain producers offset drought-induced harvest losses. October grain prices also will influence the amount some insured producers will receive in indemnity payments. But the reduced yields and high prices do little to help the negative profit margins of livestock producers struggling to feed their herds.
"The livestock industry gets just a tiny bit of reprieve in the sense that corn isn't as desperately short as I think many people thought going into this report," Hurt said. "On the other hand, corn prices aren't going to fade substantially. It's going to be very difficult for the livestock industry to just hold on as cash flows are probably going to be negative for the most part."
Watters added that while overall, "Farmers will survive, livestock producers will suffer the most and have to pay a premium price through the next 12 months or more before prices go down on next year's crops."
Purdue Extension agricultural economist Corinne Alexander offered additional analysis of the report and a 2013 Agricultural Outlook during a free webinar on Thursday (Sept. 13). The program is archived at http://www.agecon.purdue.edu/extension/programs/lunch.asp.
The USDA's full report is available for download at http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1046.