COLUMBUS – Unplanted corn acreage has become a reality in some parts of Ohio and the northern Corn Belt. Not a lot, but enough to say that planted acres may not reach the projected 76.7 million acres.
Couple that with the cool and wet growing conditions throughout most of May into June and you have set up a scenario that could see USDA reduce this year’s production estimate in next month’s report.
It was too early to change the production estimate this month. New crop production is estimated at 9.6 billion bushels. Don’t be surprised if the number is reduced to 9.4 billion after the acreage report is released June 29 and crop conditions continue to deteriorate.
On the other hand, at least one agricultural climatologist continues to call for an increase from the current USDA 137-bushel yield projection.
He contends the early planting, good moisture (even if excessive at time in some locations) and increasing temperatures throughout the Corn Belt are setting the stage for a 141-bushel national yield, down from his earlier estimates but still above USDA.
Old crop corn exports continue to experience difficulty. Increased availability of corn exports from South America, a desire for “StarLink-free” corn and a strengthening dollar have conspired to extend last year’s reduction in corn exports into this year.
Following what was thought to be the ’98 turnaround for corn exports, last year’s exports declined by 40 million bushels. The reality of the situation has lead the USDA to reduce this year’s estimate to 1.85 billion bushels, 87 million fewer than last year and 50 million under last month.
Year-to-date corn exports are down 8.6 percent from last year. The USDA number is only down 4.5 percent.
The export pace needs a boost in the arm. Without a major change in the tenor of the export market, expect old crop carryout to grow.
Domestic corn usage, while record high this crop year, is expected to decline for the new crop. Due, for the most part, to reduced beef production throughout the rest of this year and into next year, domestic new crop feed use is expected to fall by 125 million bushels.
Nonfeed use is expected to set another record during the new crop year, up another 70 million bushels to 2.04 billion. Net usage, however, is expected to be down 55 million from last year’s record to 7.74 billion bushels.
With corn prices as low as they are, there is potential for a significant rise in price if this expected big crop doesn’t materialize. It would be wise to use any price rallies to finish marketing the old crop. The market does, however, seem to have an optimistic tone with respect to the new crop. Note the 40-cent rise in futures from July ’01 to July ’02.
The market is waiting for the June 29 Acreage Report. Some acreage in big soybean producing states like Iowa and Minnesota could go unplanted this year. Early planted soybeans had a difficult emerging and cool wet weather have kept them under stress throughout the Corn Belt.
The new crop is not in as good condition as last year’s crop was at this time, 68 percent rated good to excellent last year against 53 percent this year. This doesn’t sound like a higher yield this year, relative to last year.
Last year produced a 38.1-bushel national yield. The June USDA report touts a 39.5-bushel trend yield for the new crop. Expect lower acreage and yield in the next report.
Demand is building.
The upward revision of old crop domestic crush, oil and meal use confirmed what the market already knew and had factored into price – crush up 20 million bushels, oil usage up 100 million pounds and meal use up 50,000 tons. The optimism is carried into new crop projections. Projected crush up is up 20 and 30 million bushels for the month and year, respectively.
Likewise, projected domestic oil use is up 50 and 350 million tons for the month and year. New crop domestic meal usage is projected steady from last month, but up 700,000 tons for the year.
So much for thinking the domestic market could not and would not be able to absorb more beans and bean products. Low prices are doing their job. Demand is building, but the big supply continues to dominate the situation.
Growing exports across the soy complex add to the optimism in the market. The USDA raised old crop bean, oil and meal export numbers and did the same for new crop export numbers.
New crop bean exports, up 15 million bushels from last month, are expected to match last year’s record 995 million bushels. Old and new crop oil exports were both revised upward by 100 million, projecting new crop exports at 1.8 billion pounds, up 300 million for the year.
The interesting export action is with the meal component, both old and new crop estimates increased by 400,000 tons this month, raising new crop meal exports to 7.15 million tons from last month’s 6.75 million tons.
Again, demand is building, but the oversupply of beans continues to overwhelm the market.
Increased bean use and lower carryout for both old and new crop has the market moving in the right direction. Old crop carryout dropped from 295 to 270 million bushels. Projected new crop carryout was reduced to 440 from 500 million bushels.
Keep in mind, however, that the 440 million is not a small number. It is 63 percent more than is expected for the old crop and is the largest since the ’86 crop. Excess supply is the problem, not weak demand.
(The author is an ag economist at Ohio State University.)