A number of analysts expect USDA’s estimate for harvested corn acres to be cut significantly in the October “World Agricultural Supply and Demand Estimates” report, following USDA’s report this week that lowered average corn yields for the 2011 crop almost five bushels from 153.0 bushels per acre in its August report to 148.1 bushels per acre in this month’s report. In the September report USDA left harvested corn acreage at 84.4 million acres for the 2011 crop.
Among the analysts fully expecting a decrease in corn acres is Chad Hart, agricultural economist with Iowa State University, who sees both planted and harvested corn acreage being adjusted downward in next month’s report. Hart added that his previous farm-gate corn price estimate for 2011-12 was $7.00 per bushel which is the mid-point for USDA’s latest corn price forecast ($6.50 to $7.50 per bushel), “…but my fear is I’ll have to revise it a little higher again.”
“This crop has been through flood, drought, wind damage, and hail, but hasn’t been hit by frost yet….,” said Ben Parks, risk manager for FC Stone. The National Weather Service reported frost in a number of areas in the Northern Corn Belt this week. Parks also noted that USDA adjusted estimated corn demand to match the available supply in the latest report. “That is not demand that has been destroyed over the past 30 days, but rather demand that will be destroyed over the next several months.” Parks sees corn prices slipping 70 to 80 cents per bushel as harvesting increases in the next few weeks. After this pull-back in price, corn will again continue its upward trend and reach $8 per bushel next spring, he reported. In its “Estimates” report this week corn for “feed and residual” for 2011-12 was estimated by USDA at 4.7 billion bushels, down 6 percent from 2010-11 and would be the lowest feed use since 4.68 billion bushels in 1995-96.
In a related report, Dr. Joe Glauber, USDA’s chief economist told the Agricultural Science Association annual conference in Ireland this week that the U.S. beef herd in the United States has been declining and is at its lowest level in 57 years. “Because of drought in major beef producing states such as Texas and higher feed costs, there is no indication of any immediate recovery in the U.S beef herd,” he said. While the United States is a relatively small exporter in the world beef market, accounting for about 15 percent of world beef trade, Glauber expects world prices for beef to remain high. “This is good news for the Irish beef industry,” he added.
Glauber also forecast continuing strong prices for grain, but “continuing yield increases and slowing demand for ethanol production from grain crops will lead to some moderation in prices,” Glauber said. The growing of corn for ethanol production increased dramatically in the United States during past decade, driven by high oil prices and U.S. government policies for biofuels. Currently, 36 million acres of U.S corn or around 40 percent of total acreage are grown for ethanol production. Barring large increases in energy prices, the growth in ethanol production is expected to slow down as subsidies are phased out. Income growth in developing countries, particularly China, is changing diets and driving demand for protein. China is now the United States’ largest trading partner. It accounts for 60 percent of world soybean imports and there are indications it will become a significant importer of corn, according to Glauber.
Glauber also said the rapid adoption of genetically modified (GM) crop varieties is continuing in the United States. The emphasis is shifting from GM crops with higher yields and resistance to particular diseases to those who can better tolerate drought, a growing issue in the United States and other major producing countries. Scientists are also concentrating on producing crop varieties that have particular nutritional attributes, Glauber noted.
