McMillan: Corn production set to soar

The season’s first official forecast of U.S. and world crop supply and demand prospects was released Friday morning by the U.S. Department of Agriculture. Typically, there are no changes in sown acreage from USDA’s March Prospective Plantings report — and this year was no different. The real interest is in the harvested area and yield forecasts used.

Not surprisingly, the harvested area for winter wheat, especially HRW, dropped. Abandonment was expected to be high this year and those expectations have been met. USDA estimated winter wheat abandonment at 22 per cent, which was largely in line with industry expectations.

For corn there was anticipation as to whether USDA would drop its forecasted corn yield and by how much. When correlated to May 5 planting progress there has been a tendency for USDA to drop corn yield in years when planting is delayed. Given that planting is at its slowest pace in three decades there were few who thought USDA would maintain yields at 163 bushels per acre as released in February. Pre-report expectations had been for a corn yield of 160 bu./ac., and the USDA was even lower at 158 bu./ac.

“Projected yield based on a weather adjusted trend, lowered to reflect the asymmetrical yield response to July precipitation and the slow pace of planting progress as of early May,” USDA said in its report.

Even with the reduced yield, corn production remains comparatively high as a result of record sown and harvested area. Since the USDA baseline numbers were released in January, corn area has grown from 96 million acres to 97.3 million.

USDA placed corn production at 14.14 billion bushels compared to the previous estimate of 14.3 billion bushels, which reflects the worsening outlook for optimum corn production.

Total U.S. corn production is estimated at nearly 360 million tonnes, which is close to 30 tonnes higher than the previous record set in 2009-10. Even with the increase in total demand, ending stocks are set to balloon to 2.1 billion bushels at the end of 2013-14. Following the razor-thin ending stocks of this year at 759 million bushels, the threefold increase will provide some cushion for nervous marketers and users. The ending stocks estimate was slightly higher than the pre-report average of 1.97 billion bushels.

Globally, corn ending stocks are expected to exceed 154 million tonnes. These levels of global corn ending stocks have not been seen in over a decade prior to the massive U.S. ethanol expansion. The abundant ending stocks are a result of record-breaking production in many countries. Today’s USDA estimate predicts record-high corn production in Argentina, Canada, China, Russia and Ukraine. Records are also forecast to be set in various countries with smaller corn production volumes. The estimates for the other main corn growers — South Africa, Mexico and Brazil — are close to previous record production levels.

USDA’s outlook is bearish and confirms industry analysts’ commentary prior to the report. This bearish note is reflected in USDA price estimates for corn dropping to $4.30-$5.10. But with only a fraction of the 2013-14 corn crop in the ground there is a series of steps which must occur before the grain market can have greater confidence in these forecasts becoming a reality.

— Stuart McMillan writes from Winnipeg on weather and agronomic issues affecting Prairie farmers.

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