Crop sector forecasts under different yield scenarios
Now that we know how many acres farmers are intending to plant, the critical factor shaping production this year will be crop yields, and the yields will depend on the weather. This week we look at the supply and demand outcomes under three weather and yield scenarios. Clearly, yields can fall outside of the levels included here – but weather conditions would need to be pretty extreme. Note that the “normal” weather scenario for wheat reflects the mostly poor to very poor condition of the hard red winter wheat crop in the Plains states.
The “normal” weather trend yield for corn is put at 165 bushels per acre. This long term trend indicates that yields over the last three years have been low because of adverse weather, but there is clearly the possibility that weather patterns have shifted and what we think of as “normal” weather is actually more favorable than conditions that may actually exist. Of course, more favorable weather is also possible. For this analysis we put our “poor” weather yield at 152 bushels per acre, 8 percent below the normal weather trend and the “excellent” weather yield is 172 bushels per acre, up 4 percent.
The demand side of our corn balance sheet shows total disappearance steady with this year’s level at 13.4 billion bushels in 2014/15 under the normal weather scenario. Exports and ethanol use are down slightly, but feed use is a little larger. But production exceeds demand by nearly 500 million bushels with a yield of 165 bushels per acre, pushing stocks up to 1.848 billion bushels. Season average corn prices stay above $4 per bushel – at $4.30 is this scenario.
click image to zoom But the corn market gets tighter if the actual corn yield is 152 bushels per acre – as suggested in our “poor” weather scenario. Production in this scenario is 12.6 billion bushels and demand exceeds production even if higher prices cause total demand to decline by 525 million bushels below the level expected for 2013/14. Ending stocks fall to 1.055 billion bushels with the smaller crop and the corn price comes in at $4.90 per bushel. With above trend yields, ending stocks increase to 2.265 billion bushels and the season average corn price is pressured to under $4 per bushel.
Soybean ending stocks rise under all three weather scenarios. The “normal” weather yield is 44.1 bushels per acre and production comes in at 3.575 billion bushels. Our analysis uses our current soybean acreage forecast of 82 million acres, which is 500,000 above the level in the Prospective Plantings report. Under the “normal” weather scenario, production exceeds use and ending stocks increase to 300 million bushels, more than double the level forecast for 2013/14. Even with the increase in stocks, soybean prices come in at $10.25 per bushel for the crop year.
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