USDA forecasts record U.S. corn and soy
The U.S. Department of Agriculture projected a rebound in U.S. corn and soybean yields in 2013 that, along with high planted acreage, opens the door to record-large crops and for prices to tumble from 2012-13 levels.
The USDA forecast the U.S. corn crop at 14.350 billion bushels, up 35 percent on the year, and soybean output at 3.405 billion bushels, up 13 percent.
Joseph Glauber, the USDA's chief economist, talked at USDA's annual Outlook Forum, laying out the agency's expectations for the new season.
Glauber projected that season-average U.S. corn prices for 2013-14 would fall 33 percent to $4.80 per bushel and that soybean prices would tumble 27 percent to $10.50 a bushel. Futures prices for both crops hit record highs last summer as the worst drought since the 1930s scorched the Plains and Corn Belt.
Food prices will rise by a sharp 3.5 percent this year, nearly double the overall U.S. inflation rate, because of the drought, said USDA economist Rich Volpe. Meat and dairy prices would rise the most because of high feed prices on the farm that drive up production costs.
Glauber and Volpe cautioned their forecasts assume normal weather and yields. Another year of drought would drive some livestock producers out of business, said Glauber. "Historical odds favor a rebound in crop yields, however, which should bring significantly lower prices in 2013."
STAGE set FOR
Corn plantings are projected at 96.5 million acres (39.1 million hectares), down slightly from last year's 75-year high, and soybean plantings at 77.5 million acres, equaling the record high from 2009.
Record crops would replenish U.S. stockpiles that will shrink to their smallest size in years by the time this year's crops are ready for harvest. U.S. corn and soybean production has fallen for three years in a row, putting a financial pinch on livestock feeders and ethanol makers.
"The increase in production is not a surprise, but it does remind the trade this is a longer-term issue to consider," said Rich Nelson, chief strategist for Allendale Inc in McHenry, IL. "It reminds the trade that we will have a mountain of product at this fall's harvest."
Glauber said the U.S. wheat crop was struggling, with much of the acreage in states such as Kansas and Nebraska in poor to very poor condition compared with a year ago.
Wheat production was forecast at 2.1 billion bushels, down 7.4 percent but still a medium-sized crop.
"Spring rains will be especially important in the Great Plains this year, where elevated areas of abandonment are expected," Glauber said.
The United States is coming off its worst drought in decades, which has generated some skepticism that farmers in key corn and soybean states will see a return of normal weather and yields. But Glauber said conditions are on an upswing.
"We have already seen some improvement in the eastern Corn Belt," he said. "While much of Indiana and Illinois were in drought throughout much of the summer, fall and winter rainfall has improved conditions there."
Studies suggest little correlation in seasonal precipitation between one year and the next, Glauber said.
"A dry summer in 2012 has little implication for summer precipitation in 2013," he said. As well, experts say the most important factor for the corn crop is weather in July, when the crop matures.
A larger U.S. corn crop in 2013 will help push corn-for-ethanol usage to 4.675 billion bushels in 2013-14, up 175 million on the year but below 2011-12 levels, the USDA said.
Several factors are likely to hamper further growth in corn use for ethanol, Glauber said, including the overall decline in U.S. gasoline consumption and weak export prospects because of increased competition from Brazil and potential restrictions on shipments to the 27-country European Union.
However, ethanol production may run as much as 1 billion gallons below the U.S. target for this year, agricultural economist Scott Irwin of the University of Illinois said.
It will be difficult to meet the so-called renewable fuels standard in coming years, when cleaner-burning fuels are supposed to come on to the market, Irwin said.
Biodiesel, made from soybean oil and other feedstocks, is one of the few "advanced" biofuels available in large volume.
One-fourth of U.S. soyoil will be used in making biodiesel this year, USDA estimates.