Outlook positive for most crops

by Ron Sterk
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The U.S. Department of Agriculture, in its initial forecasts for the 2013-14 marketing year issued in the May 10 World Agricultural Supply and Demand Estimates and subsequent commodity outlook reports, projected record large 2013 U.S. corn and soybean crops and a record large world wheat crop even if 2013 U.S. wheat production is seen below the 2012 level. At the same time, U.S.D.A. 2014 carryover projections for wheat, corn and soybeans were up sharply from 2013 and were above average trade estimates.

As a result of large domestic and/or world crops, projected 2013-14 average prices for most crops in the United States are down sharply from the current year. While the lower prices may renew foreign buying interest, stiff competition from large global grain and oilseed supplies also may limit gains in U.S. exports.

The biggest turnaround is expected to be in U.S. corn production, projected at a record 14,140 million bus in 2013, up 31% from a drought-reduced 10,780 million bus in 2012. The May 2012 U.S.D.A. projection for last year’s crop was 14,790 million bus. While planted area was seen up only 100,000 acres at 97.3 million acres in 2013, harvested area was projected at 89.5 million acres, up 2.1 million acres from last year, as fewer acres are expected to be abandoned under more favorable weather conditions. Average yields are seen rebounding from a 17-year low (113.5 bus an acre in 1995) of 123.4 bus an acre in 2012 to 158 bus an acre in 2013. The projected average yield is 5.6 bus below the “trend” yield as late plantings have trimmed potential, the U.S.D.A. said.

A University of Illinois study indicated average yields in that state tend to decline by 8% for corn planted after May 10, by 15% after May 20, and by 25% after June 1. Corn planting in Illinois by May 12 was 17% completed, compared with 94% planted by the same date in 2012 and 64% as the 2008-12 average for the date. Illinois is the second largest corn growing state after Iowa, where planting on May 12 was only 15% completed compared with 86% a year earlier and 79% as the five-year average. Corn planting in the 18 largest growing states as an aggregate was 28% completed by May 12, compared with 85% a year ago and 65% as the average.

Should the record large 2013 corn production occur, the U.S.D.A. foresees stocks growing and prices tumbling. In its May 10 WASDE, the U.S.D.A. projected the 2014 corn carryover at 2,004 million bus, up 164% from 759 million bus forecast for Sept. 1, 2013. The 2014 carryover would be the largest since 2,114 million bus in 2004, while the 2013 carryover would be the smallest since 426 million bus in 1995.

The U.S.D.A. projected the price of corn paid to farmers in 2013-14 to average between $4.30@5.10 a bu, down from $6.70@7.10 expected in 2012-13 and $6.22 in 2011-12. New crop corn futures were trading around $5.50 a bu last week, about $1 a bu below old crop contracts.

But the United States isn’t alone in boosting 2013-14 corn production, with record global coarse grain production, mostly corn, also projected. A record large corn crop is expected in China, with strong production also seen in South America, E.U.-27 and the former Soviet Union countries.

The U.S.D.A. also projected a record large U.S. soybean crop of 3,390 million bus in 2013, although the contrast was less dramatic than that of corn, up 12% from 3,015 million bus in 2012. The projection was based on a 100,000-acre increase from 2012 in harvested area and a return to trend yields, expected to average 44.5 bus an acre, up from the drought-reduced yield of 39.6 bus an acre in 2012. As with corn, projected carryover on Sept. 1, 2014, of 265 million bus soared, up 140% from 125 million bus in 2013. Prices paid to farmers for soybeans in 2013-14 were projected to average $9.50@11.50 a bu, down from $14.30 a bu in 2012-13 and $12.50 in 2011-12.

U.S. soybeans may face stiffer export competition in 2013-14 as production gains “far outstrip its consumption growth,” the U.S.D.A. said. Back-to-back expected record soybean crops in Brazil, which topped the United States as the world’s largest soybean producer in 2012-13, and delays in marketing and shipping have resulted in large carryover stocks there.

Last week’s favorable weather also allowed significant planting progress for U.S. spring wheat and other crops. But it may deter ideas of increased soybean plantings as farmers will be less likely to switch from corn to soybeans if they can get their corn in the ground before the end of May.

U.S. wheat producers face the grim prospect of lower production levels (except for soft red winter wheat) in 2013 and lower prices amid limited export potential due to record global production.

It should be noted that with the exception of survey-based winter wheat estimates, all other U.S.D.A. domestic projections were based on trend yields and prospective planting numbers, with the latter especially susceptible to wide changes before actual plantings occur. Survey-based planted area won’t be known until the June 28 Acreage report.

Now it’s up to the weather, which let most U.S. producers down a year ago, to deliver favorable growing conditions. Although the cool and wet 2013 planting season so far has been drastically different from last year’s warm and dry weather, most meteorologists have forecast significantly improved growing conditions from last year, which bodes well for reaching the U.S.D.A. numbers.

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