USDA forecast calls for increase in crop yields

Feb 28, 2014

USDA’s annual Agricultural Outlook Forum, held Feb. 20-21, 2014, at the Crystal Gateway Marriott Hotel in Arlington, VA, started with Chief Economist Joe Glauber issuing the department’s projections for coming year, including forecasts for corn, soybeans, wheat, cotton, sugar and other farm commodities, as well as exports.

The outlook caused corn futures to fall Friday, following the Feb. 20 announcement of bigger crops and lower farm prices, and expectations of a 43 percent rise in corn ending stocks— from 1.4 billion bushels in 2013 to 2.1 billion in 2014.

The forecast, released at USDA’s Outlook Forum, calls for corn farm prices to drop from an average of $4.50 in 2013 to $3.90 in 2014.

USDA is also calling for a sharp reduction in soybean prices, to an average of $9.65 in 2014 from $12.70 in 2013, as ending stocks rise from 150 million bushels to 285 million bushels, the highest level in eight years. Prices for soybean futures rose after release of the report.

While forecasts of planted acres of corn, soybeans and wheat are expected to be down, the forecast calls for higher yields in both corn and soybeans, with the help from Mother Nature’s return to normal.

Reduced plantings of wheat and corn, according to Mark Ash, an economist with the Economic Research Service of USDA, will be partly offset by an increase in soybean acres planted. “Despite a decline in fertilizers costs,” Ash said, “corn should lose acres to soybeans.” USDA predicts that 700,000 fewer wheat acres, 3.4 million fewer corn acres and 3 million more soybean acres will be planted.

Corn yields in 2014 may jump 4.1 percent to produce 13.985 billion bushels, leaving stockpiles on Aug. 31, 2015, at 2.111 billion bushels, the highest since 2005 and 43 percent larger than the 1.481 billion projected for a year earlier, the USDA said.

Total demand for corn is expected to hit a new record of 13.38 bb, with feed use projected at 5.4 bb (up 100 mb), ethanol stable at 5.0 bb, and exports down 50 mb to 1.55 bb. “All these numbers seem reasonable, with the most interesting point being the ethanol estimate implying no revision in the Renewable Fuel Standard coming from EPA,” Darin Newsom, DTN, said.

“Ending stocks for 2014- 15 are seen at a whopping 2.111 bb, the first time the 2.0 bb mark would be crested since 2004-2005, before the beginning of corn’s demand market in 2005-06.

The bottom line, ending stocks-to-use, came in at 15.8 percent, the largest since the 17.5 percent estimated at the end of the 2005-06 marketing year. USDA has average cash price pegged at $3.90, but think about what that means. New-crop cash corn will have to fall to the low $3 area, if not lower, to offset the time spent well above $4.”

Wheat production will increase slightly to 2.16 billion acres, despite lower yields and fewer acres planted, according to USDA.

While wheat ending stocks are not projected to increase, Ash said that reduced domestic demand for feed, coupled with strong competition from foreign sources, would lead to a decline in prices. The outlook calls for wheat prices to average $5.30 this year, down $1.50 from last year.

USDA projects that soybean supplies during the 2014-15 marketing year will reach a record 3.7 billion bushels, up 7 percent from the previous year mostly on higher production.

Agriculture Secretary Tom Vilsack joined the forum following his trip to drought-stricken California with President Obama to deliver a keynote address on the highlights of the 2012 agricultural census report.

The food price session, moderated by Michael Mc- Connell of Informa Economics, provided a perspective on food price inflation, the main factors that contribute to food price movements, and the implications for consumers in the United States and abroad. ERS Economist Richard Volpe presented the latest outlook for retail food prices, recent trends in food expenditure patterns, and general economy considerations. Another ERS economist, Ron Trostle, discussed the volatility in commodity prices in recent years, and the impacts on food prices. And Keith Wiebe, Senior Research Fellow at the International Food Policy Research Institute (IFPRI), will address the implications of food prices for global food security.

Todd Davis, Senior Economist with the Farm Bureau, moderated a session on farm income. ERS’s Kevin Patrick presented the most recent USDA estimates and forecasts of net farm income and other financial measures for 2014. Economist Jeremy Weber covered various measures of the well-being of farm households.

Also on the panel is Brent Gloy of Purdue University’s Center for Commercial Agriculture, who shared some thoughts on the longer-term outlook for farm income and whether current levels of prosperity are sustainable, focusing on such factors as global economic growth patterns, interest rates, and land values.

Vilsack, in January, announced the selection of 30 college students who won a trip to the forum including 20 university juniors and seniors who were chosen on the basis of their essays on “Agriculture as a Career,” and 10 graduate students who were selected for their response to “The Greatest Challenge Facing Agriculture over the Next Five Years.”

“The future of agriculture and rural America depends on the upcoming generation of leaders in farming, ranching and conservation, and the students selected to attend the Agricultural Outlook Forum are among the best young leaders our country has to offer,” said Vilsack. “Participating in the Agricultural Outlook Forum will expose these students to a variety of perspectives on this country’s most pressing agricultural challenges and lay the groundwork for bright futures in food, fiber and forestry.” — Traci Eatherton, WLJ Editor