December 2012 corn futures reached a high of $6.735 on Aug. 31, 2011, declined to a low of $5.23 on Mar. 30, 2012, and are currently trading near $5.40. The steady decline in prices over the past few months reflects, in part, expectations for a large 2012 U.S. corn crop and some re-building of inventories during the year ahead.
Prospects for a large increase in corn acreage support expectations for more abundant stocks next year, but opinions about the magnitude of the build-up vary considerably. Since the end of the 2012-13 marketing year is 16 months away, uncertainty will abound for several more months. Expectations for the 2012-13 marketing year begin with the likely size of the 2012 crop.
Producers have reported intentions to plant 95.864 million acres of corn, 3.943 million more than planted in 2011, pointing to acreage harvested for grain of about 88.8 million acres. That would be nearly 4.8 million more than harvested last year. Producers will be resurveyed in June to identify actual planted acreage and likely acreage for harvest. Anecdotal evidence suggests that some acreage intended for corn will be planted to soybeans due to the shift in price relationships following the March survey.
On the other hand, an early start to corn planting and the potential that total crop acreage will exceed intentions supports ideas that corn acreage could still reach intentions. The deviation from March intentions should be small, with a projection of 88 million acres harvested for grain used here.
Yield expectations for 2012 also vary considerably, reflecting differences of opinion about the magnitude of the trend yield for 2012, the likely impact of early planting, and likely summer weather conditions. The long term trend for the U.S. average yield in 2012 is between 160 and 161 bushels. Prospects for a smaller than average portion of the 2012 crop to be planted after optimum dates for maximum yield potential add about two bushels to the average yield expectation. That impact can be thought of as more or less permanent.
That is, whatever the average yield turns out to be, it might be about two bushels higher than if an average amount of the crop had been planted late. In the end, summer weather will be the largest determinant of the average yield. A yield expectation of about 162.5 bushels seems most reasonable at this time, pointing to a crop of 14.3 billion bushels.
Consumption of U.S. corn during the year ahead is also subject to a lot of uncertainty due to the unknowns surrounding a wide array of factors that include crop production in the rest of the world, U.S. biofuels policy, and domestic and world economic conditions. The starting point in making consumption projections is the expected level of use during the current year. As pointed out last week, however, the likely level of consumption this year is not yet settled. For ethanol, the rapidly approaching blend wall for E10 and the delays in implementing E15 suggest a plateauing of corn use in that category near the 5 billion bushels expected for this year.