The U.S. corn market is currently dealing with uncertainty across the board, including production stemming from acreage and yield considerations, acreage uncertainty as its own issue, and the pace of corn consumption, according to University of Illinois Agricultural Economist Darrel Good.
For acreage, the U.S. Department of Agriculture's National Agricultural Statistics Service (NASS) currently estimates planted acreage at 97.379 million acres. The Farm Service Agency report of prevented acreage released the week of August 12 indicated prevented corn acreage of 3.411 million acres. The estimate exceeded expectations and resulted in speculation that the NASS estimate might eventually be reduced.
However, there has not been a close relationship between prevented acres and the change in the NASS estimate of planted acres from June to the final estimate, according to Good. In 2010, for example, 2.1 million corn acres were reported as prevented, but the NASS final estimate of planted acres exceeded the June estimate by 320,000. In 2011, prevented acres totaled 3.01 million, yet the final NASS estimate of planted acres was only 346,000 less than the June estimate.
Beyond planted acreage, there is some uncertainty about potential acreage harvested for grain. The difference between planted acreage and acreage harvested for grain averaged only 6.8 million acres in 2009 and 2010, about 400,000 less than the previous five-year average. The difference increased to 7.95 million in 2011 and 9.78 million in 2012 as poor weather resulted in more acres harvested for silage or abandoned. In 2013, NASS estimates the difference at 8.244 million acres. There is potential for the difference to vary from that estimate, depending on how the growing season ends, according to Good.
The NASS August forecast of the U.S. average corn yield of 154.4 bushels per acre was three to four bushels less than expected. The initial reaction was that the forecast would be larger in subsequent reports. However, weather conditions have become less favorable as large areas of the Dakotas, Minnesota, Wisconsin, Iowa, Missouri and Illinois received less-than-average precipitation over the last 60 days and particularly over the past 30 days. While more seasonal temperatures in coming weeks will help advance maturity, the combination of warm and dry weather will likely result in declining crop condition ratings and yield expectations more in line with the USDA forecast, said Good.
The pace of corn consumption has also accelerated as the 2012-2013 marketing year winds down. Based on weekly estimates of ethanol production, it appears that corn used for ethanol and co-product production during the last quarter of the marketing year will be 40 to 45 million bushels more than used during the summer quarter in 2011-2012. If so, use for the entire marketing year will exceed the previous USDA forecast by 30 to 35 million bushels.
"Taken together, recent developments suggest that new crop corn prices may have established a low before harvest," said Good. "At least the extreme lows that have been reflected in some private forecasts now seem unlikely. The September 12, USDA Crop Production report looms as very important for price direction."
