Corn yield slashed…again
Source: John Michael Riley, Asst. Extension Professor, Department of Agricultural Economics, Mississippi State University
click image to zoom The World Agricultural Outlook Board of USDA released their monthly World Agricultural Supply and Demand Estimates report (WASDE) this past Friday morning. For those who have not seen the report for corn, here is a quick recap. The report, for the second month in a row, revealed a smaller estimated corn crop. Yield is currently projected 123.4 bu/ac compared to 146.0 projected last month and 126.2 expected by pre-report analyst. Collectively, the projected national yield has fallen 42.6 bu/ac from the trend yield of 166.0 reported in June. After factoring in a projected decrease in the number of acres that will be harvested (from 88.9 million to 87.4) this would put production at 10.779 billion bushels. The production estimate was 192 million lower than the pre-report expectations of 10.971 billion bushels (the pre-report yield and production expectations resulted in an implied harvested acreage number of 86.9 million). If realized corn acreage abandonment would surpass 9 million acres, the largest amount going back as far as 1950, and this is a conservative estimate, as the number of corn acres harvested for silage has not been reported.
The lower supply will cause some rationing by end users. This is reflected by USDA in that projected corn used for feed was lowered to 4.075 billion bushels, down 725 million, projected corn used for ethanol was lowered 400 million bushels to 4.5 billion, and corn exports were lowered to a projected 1.3 billion bushels, down 300 million. Collectively USDA projects corn ending stocks at 650 million bushels, a 45% decline from last month's expectations but in-line with the average pre-report estimate of 651. The smaller yield and production number had traders nervous in the early trading and corn surged to $8.48 3/4 per bushel. After the knee-jerk reaction, prices cooled as all USDA values were in the ballpark of what had already been priced into the market, especially the ending stock number.
So, over the course of two months, 4.011 billion bushels of corn have evaporated with the drought. What appeared to be a bin-busting crop early in the season due to ahead of schedule plantings and favorable weather has potentially become roughly equal to the size of the crop in the mid 2000’s. However, the use of corn has changed over this same time period. Corn used for feed purposes has declined 30%, from about 6 billion bushels to the latest projection of 4.075, while corn used for ethanol has increased from just over 1.5 billion bushels to 4.5 or roughly 2.5 times more. Granted, the co-products that are made available through the ethanol production process have offset some of this loss. The pending fact that fewer cattle will be available to feed will also alleviate some of the feed corn demand pressure. Still, losing four billion bushels has already stung the market and the industry and will likely continue to wreak havoc moving forward.