CBO projects record corn crop

Feb 8, 2013

—Agency releases early forecast on production, budget costs.

The Congressional Budget Office (CBO) projects a record corn crop in 2013, a near-record soybean crop, and lower prices for both.

In an early projection of crop production and the costs of government farm programs, CBO forecast average corn prices at $4.51 per bushel next fall because farmers will plant 97 million acres with an average yield 161.5 bushels per acre and produce a 14.5 billion-bushel corn crop.

CBO’s numbers steal some thunder from USDA’s forecasts set to be released next week leading up to the USDA Outlook conference set for Feb. 21-22.

CBO also projected that ending stocks for corn after the 2013 crop will increase to 1.8 billion bushels, up from the projection of 647 million bushels for ending stocks for the 2012 crop.

For soybeans, CBO is projecting a 3.3 billionbushel crop on 77 million planted acres. The average yield would be 43.5 bushels per acre with an average market price of $11 per bushel.

Such government trend lines tend to ignore what is actually happening in the real world, such as current weather models. The National Oceanic and Atmospheric Administration (NOAA) notes persistent drought is expected to remain throughout most of the Great Plains through the end of April, though some improvement is expected in the Eastern Corn Belt. Subsoil moisture levels also remain low for most of the country. NOAA predicts most states west of the Mississippi River have a less than 50 percent probability of receiving enough moisture over the next six months to end drought conditions.

What the CBO baseline does, however, is potentially boost the pot of money available for the House and Senate Agriculture committees to write a new farm bill, or show even greater potential savings. CBO bumped up the 10-year budget costs for USDA farm and nutrition programs by $6 billion to $976 billion.

While CBO projects a $4.51 per-bushel corn price for 2012, the crop insurance guarantee is pegged to the average December futures price for the month of February. As of now, that price protection level is above $5.80 a bushel.

CBO also projects lower crop insurance costs this year despite a record $16 billion projected in crop insurance indemnities for the 2012 crop. Lower price projections in the coming years would drop the projected premium subsidy, according to CBO. As the Sustainable Agriculture Coalition pointed out, last year, CBO projected last March that crop insurers would spend under $8.5 billion, despite a high level of price protection.

Because no farm bill has been created, CBO factors in the 10-year costs of direct payments, which are expected to be cut or eliminated if and when a new five-year farm program is created by Congress. Projections also were made for spending on programs such as the Average Crop Revenue Election program that Congress is expected to eliminate as well.

Projections also did not factor in the effect of automatic, across-the-board cuts under sequestration. USDA has not provided program details for those cuts or provided a projected dollar figure. A White House report from last fall cited about $2.47 billion in cuts from USDA programs under the 2013 budget. — Chris Clayton, DTN