Next year’s corn crop needs to be a record 13.407 billion bushels if an average farm price of $5.00 per bushel is to be realized for 2013-14, according to a FarmDocDaily.com report earlier this month. Drs. Darrel Good and Scott Irwin with the Department of Agricultural and Consumer Economics at the University of Illinois, who conducted the analysis, explained that the two obvious key factors to achieving 13.407 billion bushels are acres planted to corn and the yield per acre.
“A number of elements” are involved in projecting prospectus acreage that will be planted to corn in 2013, the report noted. These elements for corn during 2013-14 are the expected level of beginning stocks; expected magnitude of consumption; appropriate level of ending stocks; relationship between planted acreage and acreage harvested for grain; and expected average corn yields.
Further, to determine the needed size of the corn harvest, Good and Irwin said they needed to derive a “reasonable” price for corn. The price of $5.00 per bushel was selected because it is a level that “results in positive returns for both producers and users of corn.” The most recent year that match this criteria was 2010-11 when the acreage farm price for corn was $5.18 per bushel and the ending stocks were 8.6 percent of usage.
On the demand side of the equation, Good and Irwin looked at recent quantities of corn used for exports, feed-residual, ethanol-by-products, and other domestic processing, which they estimate for 2013-14 to be (billion bushels) 1.80, 4.80, 4.74, and 1.45, respectively. Feed-residual use of corn was a record quantity of almost 6.2 billion bushels in 2005-06 and 2006-07 but has declined to a 24-year low of 4.15 billion bushels for 2012-13. Ending stocks were put at 1.279 billion bushels, which would represent 10 percent of total corn usage during 2013-14.
To gauge the best estimate for corn yields, the study used a linear trend-line yield based on yields from 1960 through 2012, but adjusted the actual yields during this timeperiod by using a crop weather model to take into account varying weather conditions. This calculation resulted in a corn yield of 162 bushels per acre for 2013. Thus, to achieve a crop of 13.407 billion bushels, 90.01 million acres of corn will need to be planted next year. If the yield is 10 bushels per acre under this average, 95.45 million acreas would need to be planted. On the other hand, if the yield is 5 bushels above “trend” yield (167.0 bushels), 87.53 million acres need to be planted.
With much of the corn belt continuing to endure drought conditions, the analysts believe the current market may be reflecting expectation for a below-trend yield in 2013. Planted corn acres will not need to exceed the acreage in 2012 unless “demand is stronger than currently anticipated or historically large yield concerns persist into the spring,” the report concluded.
