Going into 2017, market expectations were for a slight reduction in U.S. ending stocks for feed grains, and a marginally brighter price outlook. Planted acres were down almost 4 million (with soybeans an all-time record high) and the use categories steady, with increases in feed and fuel compensating for lower exports. Then early in the season, production problems began to arise.
Persistent drought conditions developed over much of the western Corn Belt while in the east, wet soils made it difficult to get the crop up and going. In the June 12 “Crop Progress” report from USDA, the condition of the corn crop in Illinois and Indiana was 14 percent and 20 percent very poor and poor because of the wet start to the year. By mid-July, drought in North Dakota and South Dakota had pushed very poor and poor corn ratings in those states to 24 percent and 38 percent. In August, drought in Nebraska and Iowa raised corn ratings of very poor and poor to double-digit levels – 13 percent and 12 percent.
Expectations increased for some decrease in the average U.S. corn yield compared to the record-setting yield of 2016, back towards at least a trend line yield in the range of 166 to 168 bushels per acre. Instead, the average corn yield for 2017 set another all-time high of 175.4 bushels per acre (see Figure 1). The yields in the states cited above were mostly down from the year before but all still above their five-year averages. Boosting the national average were good corn yields across the south, with record crops from Louisiana to South Carolina.
So we begin 2018 with a larger level of ending stocks on hand, not smaller. Consumption trends continue to look positive with slight uptrends continuing in feed and fuel. Exports have been strong this winter but will be impacted by the degree of export competition from South America beginning in spring 2018. Overall, corn use will likely be up slightly.
The acreage question will be influenced by the price outlook between corn and competing crops, soybeans for most of the country, cotton in much of the South, but also by agronomic considerations. Extension publications in the Midwest note that planting soybeans behind soybeans is not a best management practice, and continuous soybeans will likely produce lower yields. As farmers continue to struggle with low profit margins, practices that result in higher yields are critical to lowering the breakeven price for a crop. Expect some shift back to corn from the record level of soybeans planted last year.
So the outlook for 2018 is based on a slightly larger level of carryover stocks from the 2017 crop, steady to firm consumption trends, and an increase in acres. With the strong yield performance of the last several years, a trend line-based yield projection for 2018 would be around 170 bushels per acre. That scenario would result in a price outlook little changed from the last several years: a futures-based price this fall from $3.20 to $3.80.