November 10, 2014
Those anticipating today's USDA Crop Production Report were surprised when the corn forecast was lowered from the October report. Soybean production was increased. " If current production and consumption forecasts actually verify, the big story this year will be that extremely large corn and soybean crops resulted in less than burdensome year ending stocks," says Darrel Good, University of Illinois ag economist.
The modest level of stocks relative to the consumption base opens the door for a tighter supply and consumption balance for the 2015-16 marketing year, particularly for corn If consumption next year remains near the projected level for this year, a corn crop less than 13.66 billion bushels would result in a drawdown in stocks. With a national average yield at the trend value of 163 bushels per acre, harvested acreage would have to increase by about 700,000 acres to produce a crop greater than 13.66 billion bushels. Similarly, with acreage at this year's level, the national average yield would have to be at 164.4 bushels to produce a crop of 13.66 billion bushels. The soybean picture is a little different. If soybean consumption next year continues at the level projected for this year, a crop less than 3.615 billion bushels would result in a drawdown in year ending stocks. A trend yield of 44.3 bushels per acre would require harvested acreage of only 81.6 million to produce a crop of 3.615 billion bushels. That is 1.8 million fewer acres than expected to be harvested this year.
While the large harvest this year will keep prices at relatively low levels, particularly for corn, the odds now favor prices that will be profitable for both corn and soybean producers in 2015-16.
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