USDA Projects Lowest Corn Yield in 17 Years
Slightly lower than what trade analysts were expecting
The USDA's August 10 assessment of the U.S. crop situation predicts that drought-stricken farmers will harvest 123.4 bushels of corn per acre this year, which would be the lowest yield in 17 years. The estimate, the first of the season based on surveys of fields, is about four bushels below what trade analysts had been expecting.
Corn
USDA projected total corn production at 10.8 billion bushels. That would be the smallest crop since 2006, which was before Congress raised and extended ethanol usage mandates, pushing farmers to expand acreage. Farmers harvested 12.4 billion bushels last year, and just last month USDA was still projecting production of 12.9 billion bushel in its first report based on actual field surveys.
The agency predicted record average farm corn prices in a range of $7.50 to $8.90 per bushel, up sharply from the $5.40 to $6.40 per bushel projected in July. Corn ending stocks for the 2011-2012 marketing year ending in September are projected to be 118 million bushels higher at 1 billion bushels with lower expected exports, reduced corn use for ethanol, and a small increase in imports. Corn ending stock for 2012-2013 is expected to drop to 650 million bushels, even as usage is expected to decline. That would be the lowest carryout since 1995-1996.
In addition, USDA reduced its projection for feed use for corn, as well as the use of corn for ethanol. Corn use for feed is expected to drop to 4 billion bushels from 4.8 billion predicted last month and corn use for ethanol is expected to drop by 400 million bushels, to 4.5 billion bushels. That is likely to intensify pressure on EPA from the livestock industry to lower the Renewable Fuel Standard (RFS) for corn ethanol. The report is expected to further increase pressure on lawmakers to come up with relief for farmers and ranchers and on the EPA to lower the Renewable Fuel Standard for ethanol.
Soybeans
Soybean futures also moved higher, supported by government forecasts projecting domestic and export demand will chew away at an expected drop in production. This year's soybean crop will total 2.692 billion bushels, down 358 million due to lower harvested area and yields. While not a large drop from prior forecasts, the crop is still not seen large enough to replenish tight supplies.
The U.S. season-average soybean price is projected in a range of $15.00 to $17.00 per bushel, up $2.00 on both ends. Soybean meal prices are projected in a range of $460 to $490 per short ton compared with $365 to $395 last month.
