Some perspective on USDA's June forecast update

There were some surprises in last week's USDA World Agriculture Supply and Demand Estimates (WASDE) report. The biggest surprises were for things that USDA did not change, rather than for the changes that were made.

Most people expected USDA to reduce 2013 corn acreage in response to the very late planting season for some key areas of the country, but USDA held the forecast steady at 97.3 million acres. At least based on the March Prospective Plantings report, farmers still had nearly 5 million acres of corn to plant as of June 10. More than 4 million of those acres are across the northern tier of states running from North Dakota through Illinois. There is at least the possibility that some farmers in these far north states have already decided that corn is not the most viable option this year.

USDA did lower the national average corn yield modestly, reducing the figure by 1.5 bushels per acre from the May report, to 156.5 bushels. That reduced production by 135 million bushels, but the crop would still exceed the 14 billion bushel mark.

At the end of June USDA will release the annual acreage report, but with nearly 10 million acres unplanted at the beginning of June when survey information was gathered, there will still be some acreage uncertainty even after the report is released.

USDA also did not change the forecast for U.S. soybean acreage or yield. If some of the land intended for corn doesn't get planted to corn, there is a good chance that soybean acreage will come in above intentions. That makes logical sense, but it often doesn't happen that way.

For example, in 2011 when wet weather delayed crop planting, corn acreage came in below intentions, but so did soybean acreage. That was also true in 2010 and both corn and soybean acreage came in above intentions in 2009.

University studies indicate that late planting can reduce soybean yields. So, with 22 million acres of soybeans to be planted after June 10 and 14 million of those acres in the northern tier of states, the odds of the national average soybean yield falling below trend are increasing.

The increase in the forecast for wheat production in USDA's update was also surprising. The winter wheat yield was increased by 0.5 bushels per acre to 46.1. For months the news story has been how bad the winter wheat crop conditions were, but now the national average yield is just 1.1 bushels per acre below the 2012 level.

Yields were up compared to May in some of the soft red winter wheat producing areas where drought has not been a problem, but the yield forecasts were also raised for Kansas and Nebraska which remain in the grip of severe to exceptional drought conditions. USDA did not change spring wheat acreage even with 1.43 million acres of land in North Dakota still not planted as of last week.

Important new information will become available at the end of the month. USDA will release the annual acreage report. USDA surveys farmers about what they actually planted for this report. However, with the delayed planting this year, a significant part of the acreage for most crops will still reflect what farmers intended to plant at the time the survey was completed.

USDA will also release the quarterly Grain Stocks report at the end of the month. This report will show ending stocks for the 2012/13 wheat crop year and provide crucial information about corn feed and residual use so far in the crop year. The information about corn feed and residual will help determine how tight supplies will be over the summer and how much corn will be carried over into 2013/14.



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