Corn yields cause supply/demand concerns

Sep 2, 2011
With the hottest summer on record in several regions, yield prospects for corn crops are eroding. The decrease in yields is raising concerns among food processors, livestock producers and biofuel makers since a bumper crop is needed to replenish stocks.

USDA’s first corn yield forecast for 2011 was released Aug. 11 and indicated a U.S. average yield of 153 bushels per acre. Iowa farmers are expected to produce an average yield of 177 bushels per acre. USDA’s reports on corn crop condition have been declining steadily throughout the summer, hitting 54 percent last week compared to last year’s 77 percent in good or excellent condition at this same time. Poorest corn condition ratings came from Texas (68 percent poor or very poor), North

Carolina (48 percent poor or very poor ), Kansas (41 percent poor or very poor) and Missouri (39 percent poor or very poor ).

USDA’s next 2011 yield estimate comes out in the Sept. 12 Crop Report and analysts are predicting September yields to come in lower. While the yields continue to decline, and analysts look at the basic laws of supply and demand, corn prices continue their surge. Corn is up more than 30 percent from July, hitting new highs as farmers head into harvest with crops damaged by dry weather.

USDA reported that about twothirds of Iowa’s corn was already in or past the milk stage of kernel development. At dent stage, the crop needs about a month of good growing season to finish well. Kernels contain less than half of their final weight at dent stage. “So, you need to keep in mind that much can change in a month,” said Iowa State University Extension climatologist Elwynn Taylor.

Pro Farmer Midwest Crop Tour calculated drought, hail and heat damage would pressure yields in most areas. Although analysts believe the total crop is still likely to be a record harvest at 12.4 billion bushels, demand will continue to put pressure on supplies.

According to Andrew Gottschalk and Bob Wilson at HedgersEdge. com, “Pro Farmer’s projected corn yield, production estimate and the most recent USDA demand estimate ending stocks would calculate at 243 million bushels or an ending stocks/usage level of only 1.8 percent. Such an ending stocks/usage level would suggest economic value, basis the March corn futures during the December-March period, at $10.21, with no standard error applied.”

Comparing this to the 1996/1997 period where ending stock/usage was 5 percent, Gottschalk and Wilson said that, “…ending stocks ultimately should be no lower than 660 million bushels. If this proves to be the result for the 2011/2012 marketing year, this implies 417 million bushels of demand needs to be rationed out through higher prices.” They predict potential price targets for March corn futures to be $8.13, $8.54, $9.07 and $10.21.
With the ethanol industry consuming 40 percent of estimated corn production, HedgersEdge says this is the area of demand that is likely to suffer the most in the corn demand adjustment that is imminent.

Obviously, this does not bode well for corn buyers, including consumers, as food costs are predicted to rise. In addition, many livestock producers are searching for other feed options for this next year.

On a good note, the Pro Farmer tour found very little insect or disease damage. “In fact, in the small sample of 58 corn and 58 soybean fields that our group scouted in South Dakota, Nebraska, Iowa and Minnesota, we saw aphids in only three soybean fields and a couple corn fields. We saw minor instances of gray leaf spot and an occasional field with Goss’s Wilt. That's not to say there wasn’t more out there, just not in the random portions of fields we checked,” according to Kurt Lawton, crops technology editor at DTN.

State highlights from National Ag Statistics Service
Colorado: Corn was rated in mostly good condition with 63 percent at or beyond the dough stage and 13 percent dented.

Illinois: Corn in the dough stage reached 97 percent, above the five-year average of 91 percent. Corn dented was rated 72 percent, up from 53 percent the previous week. Corn mature reached 11 percent as compared to 2 percent the previous week. Corn condition was rated 6 percent excellent, 35 percent good, 37 percent fair, 16 percent poor and 6 percent very poor.

Indiana: Eighty-five percent of the corn crop is in dough and 42 percent of the corn acreage is in the dent stage. Three percent of the corn acreage is mature compared to 19 percent last year and 7 percent for the five-year average. Corn condition is rated 37 percent good to excellent compared with 57 percent last year at this time.

Iowa: Seventy percent of the corn is at or beyond the dent stage, an increase of 29 percentage points from the previous week and 20 percentage points ahead of normal. Four percent of the corn crop is now mature, behind last year’s 10 percent and the normal 5 percent. Corn condition stands at 5 percent very poor, 10 percent poor, 26 percent fair, 45 percent good, and 14 percent excellent.

Kansas: Sixty-seven percent of the corn crop has dented, behind 80 percent the previous year and 74 percent for the five-year average. Twenty-five percent of the crop is mature. Kansas corn producers harvested an additional 4 percent of the Kansas crop last week to reach 8 percent complete, though the producers in the Southeast District have now harvested 49 percent of their corn acreage. The condition of the crop continued to decline to 23 percent very poor, 23 percent poor, 27 percent fair, 22 percent good, and 5 percent excellent.

Michigan: Corn was 76 percent in the dough stage and 19 percent dented. The crop was rated 66 percent in good-to-excellent condition.

Minnesota: Another week of above-average temperatures and limited rain advanced crop maturity with corn in the dough stage reaching 82 percent compared to the 78 percent average. Thirty-six percent of corn was in the dent stage, compared to 47 percent average. Corn condition ratings were 24 percent fair and 51 percent good, a slight decrease from the previous week.

Missouri: Corn dough stage and beyond was 95 percent and corn dented was 84 percent, six days ahead of last year, and eight days ahead of normal. Corn mature was 33 percent, one day ahead of last year, and two days ahead of normal. Six percent has been harvested. Corn condition was 21 percent very poor, 23 percent poor, 26 percent fair, 26 percent good, and 4 percent excellent, decreasing slightly from last week.

Nebraska: Corn in dough stage was 93 percent, behind 98 percent last year but near the 92 percent average. Corn in the dent stage was 51 percent, behind 67 percent last year and 61 percent average. Corn condition rated 2 percent very poor, 5 percent poor, 16 percent fair, 57 percent good, and 20 percent excellent, below 81 percent good to excellent last year but above 73 percent average.

North Dakota: Seventy-four percent of the corn crop had reached the dough stage, behind 93 percent at this point last year but ahead of 70 percent for the five-year average. Corn for silage was 1 percent chopped.

Ohio: Corn in dough was 71 percent, which was 24 percent behind 2010 and 15 percent behind the five-year average. Corn dented was 21 percent, compared to 70 percent last year and 47 percent for the five-year average. Corn mature was 1 percent, which was 6 percent behind last year and 2 percent behind the five-year average. Seventy-four percent of corn was in fair-to-good condition, down 2 percent from last week.

Oklahoma: Of the corn still in the fields, 92 percent reached the dent stage, 43 percent was mature and 22 percent had been harvested by week’s end. Its condition was rated 86 percent poor to very poor.

South Dakota: Eighty-seven percent of the corn is at or beyond the dough stage, with 26 percent in the dent stage, well behind the five-year average of 39 percent. The crop is rated 73 percent in good-to-excellent condition.

Texas: Corn was 78 percent dented, 65 percent mature and 52 percent harvested as of last week. The crop was rated 33 percent very poor, 35 percent poor, 22 percent fair and 10 percent good. Soybeans were 99 percent setting pods, 69 percent dropping leaves and 33 percent harvested. The crop was rated 69 percent very poor, 23 percent poor, 7 percent fair and 1 percent good.

Wisconsin: Corn was 78 percent in the dough stage and 25 percent dented. Corn conditions were rated 2 percent very poor, 5 percent poor, 17 percent fair, 50 percent good and 26 percent excellent. — Traci Eatherton, WLJ Editor