Periodically, the USDA National Agricultural Statistics Service (NASS) updates and releases the baseline projections for U.S. crop and livestock production for the next decade. A few months ago, NASS released the latest updated baseline projections for U.S. crop production. While projections this far into the future may seem insignificant, they do become important in the future long-range planning process for farm operators, ag lenders, ag policy makers and others.
The latest release by NASS looks at baseline projections for the U.S. crop sector for the next decade (2013-2022). In the short term, the U.S. crop sector continues to be impacted by relatively high grain prices and strong profitability in crop production. Total U.S. crop acreage in 2013 is projected to be among the largest ever, exceeding 325 million acres. As of June 30, total U.S. corn acreage in 2013 was estimated at 97.4 million acres, which is the largest amount of planted corn acres in the U.S. since 1936. NASS has estimated 2013 planted soybean acreage in the U.S. at the record-level of 77.7 million acres. It should be noted that some analysts feel the level of 2013 planted corn and soybean acres may be adjusted downward later this year, due to the large amount of prevented planted crop acres from the extremely wet Spring in Southeast Minnesota, parts of Iowa, and other areas in the Upper Midwest.
The NASS annual data is shown on the basis of the federal crop year, which runs from Sept. 1 in the year of production through Aug. 31 the following year. The NASS baseline assumptions reflect continued strong global demand for U.S. produced crops, and steady growth in the world economy over the next decade. Corn-based ethanol production in the U.S. is expected to rebound from the sharp production declines in 2012 that resulted from high cash corn prices; however, NASS expects future expansion of the domestic ethanol industry to be quite slow. NASS expects most crop prices to decline significantly 2013-2014 and 2014-2015; however, NASS does expect most grain prices to remain above pre-2007 levels, due to continuing strong global demand for U.S. grains.
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The 2012 drought greatly reduced total corn production in the U.S., which led to very strong corn prices for the 2012-2013 corn marketing year. The lower corn supply and continued higher corn price levels lead to lower domestic corn use for livestock feed and ethanol production, and resulted in lower corn export levels. The supply of corn stocks is expected to more than double by the end of the 2013-2014 marketing year, as compared to the current year. If this becomes reality, it likely will lead to more moderate corn prices later in the 2013-2014 marketing year. Following are some NASS baseline projections for U.S. corn production, usage and prices in the next decade:
On the short-term, soybean production is expected to increase more quickly than soybean demand, which could lead to lower farm-level soybean prices. However, NASS expects both domestic soybean use and global soybean demand to increase in the coming years, which will help soybean prices rebound somewhat later in the decade. Here are some of the NASS baseline projections for U.S. soybean production, usage, and prices in the next decade:
Based on the NASS projections for U.S. corn and soybean production, usage, ending stocks and farm-level prices for the next decade, it appears that corn and soybean producers could be in for some much tighter profit margins over the next decade, compared to recent years. The anticipated tighter profit margins in crop production in the coming years are likely to lead to moderations in crop input costs, which have been steadily rising in recent years. If the NASS projections hold up, it is also likely to put pressure on land values and cash rental rates in the next few years, which have both risen sharply in the past few years. It should noted that the projected continued strong demand for U.S. corn and soybeans could lead to temporary sharp grain price increases, if crop production is reduced due to weather problems, such have occurred frequently across the U.S. in recent years.