How big a corn crop do we need in 2013?
The last time the corn market was a profitable venture for both producers and end-users was the 2010-2011 marketing year, when corn was just shy of $5.20 per bushel, and ending stocks were south of 10% of total consumption. So, what will have to happen for everybody to gain from the current marketplace considering today's stocks and corn demand?
Assuming next year's crop will raise between 152 and 167 bushels an acre (with trend falling at 162 bushels an acre), it creates a range of 80 to 88 million harvested acres, according to University of Illinois ag economists Darrel Good and Scott Irwin. That would add up to a total of just over 14 billion bushels, the amount needed to feed current projected consumption, and create an ending stocks figure 10% of total consumption. It would also lead to a corn price at $5 a bushel, the economists say.
"Under the scenario outlined here, consumption of U.S. corn during the 2013-14 marketing year would total 12.79 billion bushels. With beginning stocks of 647 million bushels as currently projected by the USDA, imports of 15 million bushels, and ending stocks of 1.279 billion bushels (10% of consumption), the 2013 crop would need to be a record 13.407 billion bushels," according to a report by Good and Irwin. "How many acres of corn would need to be planted to produce 13.407 billion bushels of corn? Acreage harvested for grain differs from planted acreage by the magnitude of acres harvested for silage and the magnitude of abandoned acres. In the past 10 years, that difference has ranged from 6.662 million acres (2005) to 9.225 million acres in the current drought year. The average difference in the nine years prior to 2012 was 7.256 million acres. A forecast of 7.25 million is used for 2013."
But that forecast depends completely on yield projections for next year, and that's a complete wild card at this point. Though trend yield is 162 bushels per acre for 2013, most farmers say that the way the land's entering winter, it's going to be tough to reach that trend level.
"Any early estimation that ignores the last two years of history thinking it won't affect 2013 yield is not realistic, at least until we see some major weather changes," says Agriculture.com Marketing Talk adviser sw363535. Taking this into account, Marketing Talk frequent contributor ECIN says he expects an average yield of 151 bushels per acre next year. If realized, that would yield a 13.3 billion-bushel crop next year, still shy of the 14.07 billion-bushel goal Good and Irwin say will be required to keep the pipeline full and maintain 10% ending stocks.
But, considering the hole in the demand base the drought-shortened crop has dug, a 13.3 billion-bushel crop, if realized, may be enough to at least "start to rebuilding our demand base," says Marketing Talk senior contributor rayjenkins.
"But, I fully agree we might be 'feeling the tire rub on the fender wall' several times before it's in the bin next fall," he adds.