A look at USDA’s long-range forecast
Demand grows a little faster than yields. Total U.S. corn demand rises at a rate of about 1.8 percent per year, according to USDA’s assumptions, reaching 15.3 billion bushels by the end of the forecast. On the other side of the ledger, the corn trend yield goes up by about 1 percent per year. That means that over time, corn acreage needs to rise above the 86 million acres forecast for 2015. Corn acreage gradually increases in the USDA long term forecast back to 92 million acres by the 2022/23 crop year. Stocks gradually decline to around 1.5 billion bushels and prices recover to between $4.50 and $5 per bushel.
Our analysis shows a little stronger increase in trend yields, at about 1.25 percent per year, which means we would need less acreage to satisfy the demand level forecast by USDA.
Soybean production and use recover in 2013/14. USDA also has U.S. soybean acreage declining this year, down more than 1 million acres from the 2012 level. Demand in 2013/14 rebounds back to 3.3 billion bushels, similar to the levels in 2009/10 and 2010/11. The rebound is fueled by a 100 million bushel increase in crush and a 150 million bushel increase in exports. With a trend yield of 44.4 bushels per acre, production and consumption are fairly close, but ending stocks do increase by about 40 million bushels next season. Even so stocks are still tight, below the 200 million bushel benchmark.
Soybean demand growth is pretty slow. Over the 10 year USDA forecast, demand for U.S. soybeans rises at a pretty slow pace. By 2022/23, soybean exports are put at 1.6 billion bushels, up less than 100 million bushels from the USDA forecast for 2013/14. Crush increases by a little more than 1 percent per year, getting to nearly 1.9 billion bushels at the end of the forecast, compared to 1.66 billion bushels next season. The pace of yield growth and demand growth nearly match and total soybean acreage stays around 75 million to 76 million acres throughout the forecast period.
China’s imports exceed 100 million tonnes by 2022/23. The pace of production expansion in South America and the pace of demand growth, mostly in China, will influence the outlook for U.S. soybean exports. USDA forecasts imports by China to roar ahead over the next decade, rising from about 63 million tonnes now to 103 million tonnes at the end of the forecast period. That increase accounts for nearly all of the increase in world trade that goes from 100 million tonnes to 144 million. The outlook for the world soybean market will be dramatically different if China’s imports don’t increase quite as much. An economic slowdown or a real estate market meltdown could cause the outlook to be less robust.