Weather hangs over USDA price projections
At the end of his talk about the outlook for grain and oilseed prices Friday, USDA economist Pete Riley listed the usual caveats that show that projections aren't really predictions.
There's China. Will that country still increase soybean imports? What about corn if it's cheap? Will we regain the market share we lost in corn exports after the 2012 drought, one that has Brazil slightly outpacing the U.S. in corn exports?
Then Riley blew up the type size for the biggest uncertainty of all on his slide: WEATHER. That drew laughter from a packed meeting room at USDA's annual Agricultural Outlook Forum in Arlington, Virginia.
"The big question is weather," said Riley, who works for USDA's Farm Service Agency.
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- Modest acreage, big price changes
A year ago at this time, USDA projections also showed a big crop and cheap corn. They're doing it again for 2013.
As Chief Economist Joe Glauber said on Thursday, planting 96.5 million acres (and harvesting 88.8 million), with an average yield of 163.6 bushels an acre is likely to result in an average price for that crop of $4.80 a bushel in the marketing year following harvest.
It's a dramatic decline from $7.20 a bushel for the 10.78-billion bushel corn crop harvested last year.
But, as USDA Agricultural Meteorologist Brad Rippey pointed out Friday, "There's very little relationship between drought this time of year and yield potential for corn."
According to economist Riley, even with poor weather that keeps yields to a national average of 154 bushels an acre, corn prices would average $5.80 a bushel. If the nation has a truly bountiful crop, averaging 170 bushels an acre, the 2013-14 price average for corn would be $4.20 a bushel.
Part of the reason for USDA's less-than-bullish view of corn prices is that its economists don't see ethanol production or exports rebounding this year to the levels before the drought. That modest demand and what would be a record 14.53 billion-bushel harvest, leads to breath-taking ending stocks in August of 2014 of 2.18 billion bushels of corn. That's three times the drought-shrunk stocks of 632 million bushels next August, and almost twice the ending stocks from the 2010-11 marketing year.
Exports are part of the reason for this.
"The world market has changed. Our very high prices have led to loss of market share," Riley said.
Not only are Brazil and Ukraine taking some of that corn export market, so are countries that rarely export much, including India, he said.
The result is that the projected exports of 900 million bushels from the U.S. 2012 crop will be the lowest share of global corn shipments in Foreign Agricultural Service records going back to 1960, Riley said.