The USDA’s May 10 World Agricultural Supply and Demand Estimates (WASDE) report contained supply and consumption projections for the 2013-14 marketing year for U.S. corn and soybeans. For the most part, the market focused on the projections of crop size, but according to University of Illinois agricultural economist Darrel Good, the most important information is in the projections of marketing year consumption.
“The U.S average corn yield is projected at 158 bushels per acre, below our calculation of trend yield near 161.5 bushels, and production is projected at a record 14.14 billion bushels,” Good said. “The U.S. average soybean yield is projected at 44.5 bushels per acre, above our trend-yield calculation near 44 bushels, and production is projected at a record 3.39 billion bushels. The projected corn yield reflects the expectation that yield potential has been compromised by the likelihood that a much larger-than-average percentage of the 2013 crop will be planted later than is optimal for maximum yield potential. The soybean yield forecast reflects an opportunity to plant much of the crop in a timely fashion with much improved soil moisture conditions in many areas,” Good said.
According to Good, the yield of both crops will be determined by weather conditions yet to unfold so considerable uncertainty will persist for another three months. In addition, the magnitude of planted acreage is not yet known with more information to be available in the USDA’s June Acreage report.
“The consumption projections for both crops reflect judgment about the size of the market under conditions of ample supplies and much lower prices,” Good said. “These projections are valuable because they provide context for evaluating the price implications of production potential as it unfolds over the next few months,” he said.
For corn, use for ethanol and by-product production is forecast at 4.85 billion bushels, 250 million bushels above the revised projection for the current year, but below the record consumption of just over 5 billion bushels in the 2010-11 and 2011-12 marketing years.
“The modest projection reflects the plateauing of domestic ethanol consumption as the E10 blend wall has been reached and consumption of E15 and E85 increase slowly,” Good said. “The magnitude of ethanol trade will be an important determinant of domestic production and corn consumption. Corn exports are projected at 1.3 billion bushels, well above the revised projection of 750 million bushels for the current year, but well below the 1.8 to 2.0 billion bushels that was common before the 2011-12 marketing year. Lower prices may help to stimulate exports, but competition from South American corn is expected to limit demand growth,” he said.