February 26, 2013

 

US anticipates increased corn, soy production in 2013

 

 

Along with high planted acreage, a rebound in US corn and soy yields are estimated by the USDA, which opens the door to record-large crops and for prices to tumble from 2012-13 levels.

 

The USDA forecast the US corn crop at 14.350 billion bushels, up 35% on-year, and soy output at 3.405 billion bushels, up 13%.

 

"A number of factors suggest that corn and soy yields will be likely to return to trend," Joseph Glauber, the USDA's chief economist, said at USDA's annual Outlook Forum, laying out the agency's expectations for the new season.

 

Glauber projected that season-average US corn prices for 2013-14 would fall 33% to US$4.80 per bushel and that soy prices would tumble 27% to US$10.50 a bushel. Futures prices for both crops hit record highs last summer as the worst drought since the 1930s scorched the plains and Corn Belt, the heart of US farm production.

 

Food prices will rise by a sharp 3.5% this year, nearly double the overall US inflation rate, because of the drought, said USDA economist Rich Volpe. Meat and dairy prices would rise the most because of high feed prices on the farm that drive up production costs. Glauber and Volpe cautioned their forecasts assume normal weather and yields. Another year of drought would drive some livestock producers out of business, said Glauber.

 

Corn plantings are projected at 96.5 million acres (39.1 million hectares), down slightly from last year's 75-year high, and soy plantings at 77.5 million acres, equalling the record high from 2009. Record crops would replenish US stockpiles that will shrink to their smallest size in years by the time this year's crops are ready for harvest. US corn and soy production has fallen for three years in a row, putting a financial pinch on livestock feeders and ethanol makers.

 

"The increase in production is not a surprise, but it does remind the trade this is a longer-term issue to consider," said Rich Nelson, chief strategist for Allendale Inc. in McHenry, Illinois.

 

The US upland cotton area for 2013 was forecast at 9.8 million acres, down 19% from 2012, as growers switch to more-profitable corn and soy. Cotton prices are in a slump due to surplus crops worldwide. The all-cotton crop, including upland and Pima varieties, was forecast to fall almost 17% to 14 million bales. Long-grain rice plantings are also likely to lose out to soy, with production seen down almost 4%.

 

Glauber said the US wheat crop was struggling, with much of the acreage in states such as Kansas and Nebraska in poor to very poor condition compared with a year ago. Wheat production was forecast at 2.1 billion bushels, down 7.4% but still a medium-sized crop.

 

USDA was scheduled to update its projections and provide more detail on demand for US crops on Friday (Mar 1). The US is coming off its worst drought in decades, which has generated some scepticism that farmers in key corn and soy states will see a return of normal weather and yields. But Glauber said conditions are on an upswing.

 

Separately on Thursday (Feb 28), the National Oceanic and Atmospheric Administration (NOAA) released an outlook for persistent drought through the end of May in the southern and central Plains. Drought was expected to ease in the Corn Belt west of the Mississippi River while the eastern Corn Belt is free of drought. Moisture conditions were also expected to improve in parts of the US Southeast.

 

At its worst last summer, two-thirds of the continental US was covered by drought. As of Thursday, the figure was down to 56%, with drought strongest in the wheat-growing Plains. The US average year to year is 25%. A larger US corn crop in 2013 will help push corn-for-ethanol usage to 4.675 billion bushels in 2013-14, up 175 million on the year but below 2011-12 levels, the USDA said.

 

Several factors are likely to hamper further growth in corn use for ethanol, Glauber said, including the overall decline in US gasoline consumption and weak export prospects because of increased competition from Brazil and potential restrictions on shipments to the 27-country EU. However, ethanol production may run as much as one billion gallons below the US target for this year, agricultural economist Scott Irwin of the University of Illinois told the Reuters Ags Forum.

 

It will be difficult to meet the so-called renewable fuels standard in coming years, when cleaner-burning fuels are supposed to come on to the market, Irwin said. Biodiesel, made from soyoil and other feedstocks, is one of the few "advanced" biofuels available in large volume. One-fourth of US soyoil will be used in making biodiesel this year, USDA estimates. A bushel of soy yields enough oil to make 1.5 gallons of biodiesel.