According to Good, there is also a wide range of yield expectations for the 2013 corn crop.

“The variation stems from the difficulty of assessing the likely impact of the combination of late planting, flooding and replanting in some areas and timely planting and favorable growing conditions in other areas,” Good says. “Most appear to expect an average U.S. yield below trend value in 2013. The calculation of trend value and the expected shortfall from trend, however, vary widely. Yield prospects will take on more importance following the June 28 Acreage report. Weather conditions and weekly crop condition ratings will provide some indication of yield prospects, although there has not been a strong correlation between crop ratings and yield in recent years.”

Good says that the corn price implications of unfolding production prospects will need to be evaluated in terms of the expected size of the market for U.S. corn during the 2013-14 marketing year. In the May 10 World Agricultural Supply and Demand Estimates Report (WASDE), the USDA projected the size of the market to be at 12.92 billion bushels under conditions of ample supplies and moderate prices.

“That projection is 1.785 billion bushels larger-than-expected consumption during the current marketing year, characterized by small supplies and high prices,” Good says. “Large increases in consumption are expected in each major category of use – ethanol, exports and feed and residual use. The largest percentage increase (73%) is expected for exports while the largest absolute increase (925 million bushels) is expected for feed and residual use.

“At 5.35 billion bushels, the projection of feed and residual use is the largest since 2007-2008. The large projection reflects an expected increase in livestock feeding rates, not an increase in the number of grain-consuming animal units. The expected higher feeding rate reflects a combination of lower feed prices and larger residual use associated with a very large crop. The projection appears generous and the forecast of residual use would likely decline with a smaller crop forecast, even if prices are at the projected level,” he says.

Good says that a large number of acreage, yield, consumption and price scenarios are still possible at this time.

“What’s important is that there is room for a much smaller crop than the early prospects of 14 billion bushels before rationing would be required during the upcoming marketing year,” Good says. “A crop of 13 billion bushels would be sufficient to meet expected needs at current new-crop price levels. If harvested acreage is near 85.5 million acres (4 million below the early forecast), as an example, a crop of that size would require an average yield of 152 bu., about 10 bu. below trend value. The USDA will provide updated projections in the June 12 WASDE report.”

 

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