August 13, 2001
USDA CONFIRMS SMALLER CORN AND
SOYBEAN CROP PROSPECTS
The USDA's August Crop Production
report confirmed prospects for the U.S. average corn and soybean
yields to be below trend value in 2001. The U.S. average corn
yield, based on early August conditions, is forecast at 133.9
bushels per acre, compared to a trend value near 137 bushels.
With harvested acreage at 69.191 million, the prospective crop
size is forecast at 9.266 billion bushels, 702 million bushels
smaller than the 2000 crop and the smallest crop since 1997. Compared
to last year's yield, significant declines are forecast for Michigan,
Minnesota, Missouri, Texas, and Wisconsin. Higher average yields
are expected in many southern states, including Alabama, Georgia,
Louisiana, and North Carolina. Yields in Illinois and Iowa are
expected to be down five and four bushels, respectively, while
the average in Indiana is forecast as the same as last year's
A smaller crop is expected to be
met with good demand. The USDA's World Outlook Board projects
a 135 million bushel increase in consumption of U.S. corn during
the year ahead. While feed and residual use is expected to decline
by 75 million bushels, domestic processing use is projected to
increase by 85 million and exports are expected to jump by 125
million bushels. Increased ethanol production will drive the domestic
increase while a second consecutive small corn crop in China will
contribute to larger exports.
Stocks at the end of the 2001-02
marketing year are projected at 1.459 billion bushels, down from
the projection of 2.003 billion for September 1, 2001. That projection
represents 14.8 percent of projected use, the lowest ratio in
five years. The tighter supply situation will result in somewhat
higher prices in the upcoming marketing year. The USDA projects
a marketing year average farm price of $1.90 to $2.30 per bushel.
Most observers expect that the 2001
corn yield estimate will decline in subsequent reports, citing
hot, dry conditions in early August that pushed crop ratings down.
While the August objective yield forecast reflected ear population
and ear length, kernel depth and test weight may be less than
average due to the hot weather in July and early August. A decline
in yield of the magnitude of 1983 (18.8 bushels) or 1995 (12.1
bushels) is not expected. The final yield estimate, however, may
be two to five bushels below the August forecast, similar to the
pattern of 1980 and 2000. If so, the crop may be near 9.05 billion
bushels. Based on historical patterns of yield forecasts, the
decline is not likely to be fully reflected in the September report.
The 2001 soybean yield forecast
stands at 38.7 bushels per acre, 0.6 bushels above the 2000 average,
but about 0.4 below trend value. Yields near those of last year
are expected in the eastern corn belt, while higher yields are
expected in some southern states, Nebraska, the Dakotas, and Tennessee.
Lower yields are expected in east coast states, Missouri, and
the upper midwest. The USDA's August Crop Production report also
contained a smaller acreage estimate. At 74.137 million, harvested
acreage is expected to be "only" 1.419 million larger
than acreage of a year ago. That is about 1.3 million less than
projected from March planting intentions. Based on early August
conditions, the USDA projects a 2001 soybean harvest of 2.867
billion bushels, nearly 100 million larger than last year's record
The World Outlook Board sees some
slowdown in the rate of increase in consumption of U.S. soybeans.
Use for all purposes during the 2001-02 marketing year is projected
at 2.821 billion, only 8 million more than the projection for
the current year. The increase is expected in domestic crush,
with exports expected to be unchanged. While world soybean consumption
is expected to continue to expand (lead by China) a larger South
American crop will continue to provide competition for U.S. soybeans.
The one bright spot on the consumption side is the projection
of a one billion pound (67 percent) increase in U.S. soybean oil
Year ending stocks of U.S. soybeans
are projected to grow from 250 million bushels this year to 300
million by September 1, 2002. The marketing year average price
is projected in a range of $4.35 to $5.35, compared to $4.55 for
the current year.
As with corn, most observers believe
that yield potential is now below the August forecast of 38.7
bushels per acre. Since 1979, the January average yield estimate
was below the August forecast 11 times (50 percent of the time).
The difference between the August forecast and January estimate
ranged from 0.1 bushels (1982) to 4 bushels (1983), and averaged
1.6 bushels. The difference in 1999 and 2000 was 2.7 and 2.6 bushels,
respectively. Based on that pattern of yield estimates, and the
less-than-average growing conditions the past month, the 2001
crop may be as small as 2.75 billion bushels. Based on the projected
level of use, a crop that small would result in year ending stocks
near 180 million bushels.
Corn and soybean prices will continue
to reflect weekly crop condition reports and monthly USDA projection
forecasts. Prices should be well supported in anticipation of
smaller crop forecasts and smaller U.S. and world stocks. December
corn futures and November soybean futures will likely find resistence
near recent highs of $2.47 and $5.38, respectively.
Issued by Darrel
University of Illinois