The United States will need to harvest about 10 billion bushels of corn this fall to avoid shortages that would push up the price.
That might be a hard mark to reach, considering that early forecasts show a drier trend developing in the corn belt this spring.
Production problems last year dropped U.S. average yields to 130 bushels per acre, compared to 138 bu. the year before and the five year average of 134 bu.
In total, the U.S. produced slightly more than nine billion bu. last year, down from 9.5 billion the year before and the five year average of 9.56 billion.
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The U.S. Department of Agriculture forecasts year-end stocks will fall to 0.93 billion bu., down from 1.6 billion the year before and the five year average of 1.66 billion.
That puts the year end stocks-to-use ratio at about 10 percent. It’s not quite the bin-scraping five percent set in 1995 – the lowest level in the last 25 years – but it is tighter than the usual range of 15-25 percent seen in the 1990s.
The USDA expects more corn will be seeded this spring because soybean yields have been disappointing the last two years, and the new farm bill loan rate favours corn.
It expects corn area will climb about two percent to 80.5 million acres and soybean area will drop two percent to 72.2 million acres.
The U.S. National Weather Service has issued a spring forecast showing that moisture conditions could improve in the wheat country west of the Mississippi, which has been dry, and deteriorate on the east side, which grows more corn.
The key corn states of Iowa and Missouri could see some improvement in the west but dryness in the east.
It is still much too early to say how this will affect corn production, but it increases the risk of not attaining the 10 billion bu. needed to meet demand.
USDA expects domestic consumption to improve a little. On the one hand, livestock numbers are expected to be down, but corn ethanol production is expected to increase.
USDA expects 2003-04 exports will improve slightly from this year’s slow pace.
But a bumper crop in China or Argentina could increase competition, lower U.S. exports and weigh down prices.
The next market mover to watch for will be the USDA planting intension survey, to be released March 31.
