Rationing the 2012 corn crop revisited
A month ago, Darrel Good and Scott Irwin presented alternative supply, consumption, and price projections for the 2012-13 marketing year in the context of addressing the question of whether or not prices were high enough to ration a much smaller crop. They concluded at that time that prices were likely still not high enough if the national average yield was below 135 bushels (see post here). Now that corn prices have moved higher and the USDA has released the first survey-based forecast of 2012 corn yield and production, they revisit the question of rationing.
Since the size of the 2012 crop is still not known, they present three alternative production, consumption, and price scenarios that differ from the USDA’s projections released on August 10. These alternatives, along with the current USDA projections for the 2011-12 and 2012-13 marketing years, are presented in Table 1. On the production side, all three alternative scenarios use a slightly smaller forecast of harvested acreage than reflected in the USDA’s August survey and slightly lower than used in the analysis of a month ago. The smaller forecast reflects the expectation that both acreage harvested for silage and abandoned acres will exceed producers’ expectations when surveyed for the August report. The expected difference between planted acreage and acreage harvested for grain of 9.4 million acres is more consistent with the experience of the previous dry years of 1988 and 2002.
click image to zoom Three alternative yield scenarios are presented. One scenario reflects a yield of 128 bushels, which is 4.6 bushels above the USDA August forecast. This scenario is generally consistent with the experience of 1988 and 2002 when the final yield estimates were above the August forecast by 6.1 and 4.1 bushels, respectively. The other two scenarios reflect average yields of 120 and 115 bushels. Those yields are generally consistent with the experiences of 1995, 2010, and 2011 when final yield estimates were 12.1, 12.2 and 5.8 bushels below the August forecast. An alternative to reflect the 1983 experience of an 18.3 bushels decline from the August forecast to the final estimate is not included.
The projections of total consumption for each scenario reflect the limited supply of corn and the assumption that ending stocks will be reduced to a minimum pipeline level equal to 5 percent of consumption. Compared to projected consumption for the current marketing year that ends on August 31, the USDA’s projections for 2012-13 reflect a decline in total consumption of 1.265 billion bushels. The three alternative scenarios reflect declines of 855 million, 1.503 billion, and 1.908 billion bushels, respectively. Our projections of consumption by sector differ substantially from those of a month ago due to smaller production scenarios and a different view of the ethanol demand for corn.