The latest estimates from the U.S. Department of Agriculture show lower-than-normal corn and soybean yields across the nation, with the biggest crop losses in Indiana. Ohio fared much better.
This is the second consecutive year for national crop yields below the expected average, straining already tight world grain supplies and keeping commodity prices high, said Purdue Extension agricultural economist Chris Hurt.
According to the USDA's National Agricultural Statistics Service September Crop Production report (Sept. 12), released Monday, national corn yields could average 148.1 bushels per acre, down about 13 bushels from normal yields. Soybeans followed suit at 41.8 bushels per acre, down 1.5 to 2 bushels.
The projections come with few surprises, said Ohio State University Extension agricultural economist Matt Roberts.
"The figures on corn and soybean production came pretty much in line with our expectations," he said. "We had analysis predicting between 143 and 153 bushels per acre, but the price action we saw in Chicago Monday said the market wasn't surprised by the corn estimate."
In Indiana, a state hit hard by spring floods and summer drought, average projected corn yields are 145 bushels per acre, down from trend yields of near 165. Indiana soybean yield projections are 42 bushels per acre, down six bushels from what they might have been with normal weather.
Ohio, while down slightly, looks to have closer-to-normal yields of both crops. USDA projects 153 bushels of corn per acre in Ohio, down only slightly from trend yields in the high 150s, Hurt said. Ohio soybean yields are estimated at 46 bushels per acre – only about a bushel under normal yields.
"It really does reflect that the heat and rainfall patterns were more severe in Indiana than Ohio this year, at least as it reflected on yields," he said.
Low yields will keep world grain stocks very tight, Hurt said. By August 2012 predicted U.S. stocks of both corn and soybeans look to be around a bare-minimum of just a 19-day supply. That means usage has to be reduced, and prices are likely to climb until they reach a point where end-users, such as processors and livestock producers, are forced to reduce consumption.
In estimating where the reduced bushels of corn use comes from, USDA cut 200 million bushels from feed usage estimates, 100 million bushels from ethanol production and 100 million bushels from export sales. Roberts said those estimates were reasonably in line with his read of the corn market.
"There will have to be some cutbacks in soybean use, as well – the USDA says 110 million bushels, mostly from an 85 million bushel reduction in exports," Hurt said.
The major wild card in whether soybean stocks continue to shrink is the South American crop, which is being planted now. Should South America have favorable weather, both Roberts and Hurt said the crop could make up for the shortages from the U.S. yields. Especially since farmers in countries like Argentina and Brazil will grow more acres of soybeans than in previous years.
"The amount of Chinese soybean purchases will be up 9 percent this year," he said. "South American exports will increase, as both Argentina and Brazil have about 5 percent more acres and should return to more normal yields after a 5 percent below-trendline yield last year. South America will cover all of the new purchases from China."
If the weather in South America holds up, farmers in the U.S. can expect to see soybean prices remain strong through Thanksgiving, Hurt said. After that, prices could be fairly flat through the winter. However, unfavorable growing conditions in South America would send prices up quickly.
USDA currently expects the U.S. average farm price for soybeans to range from $12.65 to $14.65 per bushel. Corn should range a record-high $6.50 to $7.50.
Now that the September report is on the books, Roberts said market watchers will quickly turn their attention back to the weather and the broader economy until the October figures are released.
"That's when the outlook board and NASS fully incorporate Farm Service Agency acreage data," he said. "We should expect an acreage cut in that report, which means there likely will be further projected cuts to consumption, also."
The full September report is available for free download on the Web at http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1046