November 25, 2004

 

 

US Corn Yield to Set New Records

 

USDA's Nov. 12 reports stated that corn production for 2004 - at 11.7 billion bushels, and average yield - at 160.2 bushels/acre, set new records.

 

"It's a big corn crop out there, and we think USDA is just going to continue to make that crop bigger - probably get close to approaching 12 billion bushels," said Randy Martinson, Progressive Ag, Fargo. "We've got a good demand, but we think this market is still going to get a little bigger as the yields in Indiana, Illinois, Minnesota and even here in North Dakota have been a lot better than what most people anticipated."

 

USDA estimated Indiana's average 2004 yield at 169 bushels/acre - 23 bushels ahead of 2003. Illinois produced a crop averaging 180-bushels/acre. Minnesota's yield averaged 157 bushels - up 11 bushels/acre from last year, while North Dakota averaged 110 bushels/acre, 2 bushels on average below last year.

 

Iowa continues to lead the nation in corn production, followed by Illinois and Nebraska. Minnesota earned fourth place for corn production, the same as last year.

 

The 2004 corn crop is a whopping 1.6 million bushels larger than the 2003 crop. At the same time, demand for corn remains strong, said Martinson.

 

"Demand has been pretty good. We need to build a good strong base for this market yet," he said. "We're starting to do that - prices have to get low enough for the demand to be brought in. Now we have to keep that demand."

 

Prices reportedly ranged from $1.52-1.85 at elevators across North Dakota. Those prices were 7 cents lower to 5 cents higher than two weeks ago.

 

In Minnesota, corn on Nov. 18 ranged from $1.76 with a basis of 28 cents under to $1.62 with a basis of 42 cents under. At one elevator in west central Minnesota, corn was $1.70 with a basis of 34 cents under. That price was 2 cents higher than two weeks earlier, and the basis had widened by 2 cents.

 

With the US dollar on equal footing with the Canadian dollar, US corn is looking pretty attractive to outside buyers these days. Even so, USDA reduced US corn exports to just over 2 billion bushels, a slightly lower number than last month.

 

Ethanol demand was left at 1.37 billion bushels, and feed use in the Nov. 12 report was pegged at 6.075 billion bushels.

 

"Feed use is still up about 220 million bushels from last year - that's a pretty good jump as far as the feed demand from last year," said Martinson. "Ethanol and feed use uses up over half of our corn production."

 

US corn ending stocks were estimated at about 1.8 billion bushels, almost double last year's 9 million bushel carryout. A normal carryout is 1-1.5 billion bushels.

 

"We need to chew through some of these bushels," said Martinson. "Ethanol production is up pretty good, feed demand is pretty good. We need to eat up the supply."

 

The plentiful supply does indicate to buyers that corn is in a "tremendous stocks building" year, said Martinson. "But if we keep the price low enough, we're going to bring demand in, and the demand base is going to grow."

 

Another factor keeping the outlook for 2005 corn rather bearish is farmers' reactions to the announcement that Asian soybean rust has been found in Louisiana and Mississippi.

 

Martinson hopes that farmers took advantage of $3 corn to make some sales earlier. For those 2004 bushels that a farmer still owns, Martinson would consider doing a storage hedge for the July time frame that would lock in a $2.30-2.35/bushel price range, and then wait for basis to improve.

 

"Asian rust is likely to pull a lot more corn acres in. There's going to be a lot of farmers that are afraid to go into soybeans because of having to spray for Asian rust and not knowing what to expect. That's probably going to keep corn acres up," said Martinson. "A lot of farmers also had tremendously large corn crops this year. That's going to entice them to put more acres into corn."