Extension News

USDA September Crop Forecast Surprises Grain Trade

9/15/2005

AMES, Iowa -- The USDA’s Sept. 12 crop forecast shows increases in corn yield potential in all major corn producing states except South Dakota, according to Robert Wisner, Iowa State University Extension economist. He reports that the largest increase was an 11 bushel per acre jump from the August crop forecast in Illinois, where drought took a heavy toll on crops in much of the state.  However, yields have been hurt less in the central and east central districts.

 

“In Iowa, corn yields are forecast to exceed last year’s exceptionally high yields in the three northern districts and central Iowa, but are expected to be sharply below normal in the east central and southeastern districts,” said Winser.

 

The USDA forecast indicated that soybean yields will be above last year in North Dakota, Minnesota, Wisconsin and Michigan, where early frosts reduced production last year.  Except for Illinois, east central and southeastern Iowa, Missouri, and Kansas, soybean yields are forecast to be reasonably good in much of the Midwest. Southern U.S. yields are forecast to be modestly below last year’s exceptionally high yields. 

 

USDA Forecasting Procedures

The updated forecasts are based on conditions around the first of September. “In many areas, crop maturity is well advanced and should permit a reasonably accurate assessment of yield potential,” said Wisner. USDA uses sophisticated scientific measurement procedures as well as farmer questionnaires to develop its crop forecasts during the growing and harvesting seasons.

 

Implications for the Corn Market

Current forecasts place the U.S. corn crop at 10.64 billion bushels, the second largest on record and only slightly below anticipated total corn use in the year ahead. Total U.S. corn supplies (including the largest old-crop carryover in 17 years) are forecast to exceed last fall’s supplies by 0.6  percent.

 

“This news plus likely restrictions on movement of grain exports from the New Orleans area for the next month or two point to serious shortages of storage space in the western Corn Belt, a continued weak corn basis, and cash corn prices in central, northern, and western Iowa in the $1.45 to $1.55 per bushel range during harvest,” said Wisner. He expects that these same conditions likely will cause a slow recovery in prices in November and December. He predicts the corn prices will gradually strengthen next spring and probably this winter, as ethanol demand expands and Mississippi River shipping returns to normal.

 

Implications for the Soybean Market

The U.S. soybean crop is forecast at 2.86 billion bushels, 9 percent below last year’s huge crop, and about 3.5 percent below anticipated total use of U.S. soybeans in the new marketing year.  But with the third largest U.S. soybean carryover stocks since 1991 and record large South American Sept. 1, 2005, soybean stocks (up an estimated 19 percent or 216 million bushels from last year), soybean supplies appear likely to be fully adequate for the year ahead said the economist.

 

“These South American stocks reports reflect changes included in USDA’s September world crop report that lowered the South American carryover stocks 74 million bushels from last month, due to larger Brazilian and Argentine soybean exports than previously anticipated, said Wisner.

 

“Better than expected U.S. yield potential, plus lack of storage space and river shipping problems appear likely to keep cash soybean prices in much of central, northern, and western Iowa in the $5.30 to $5.45 per bushel range through harvest,” he said. Modestly higher prices are possible late this year, and in January and February as grain traders worry about South American weather and yields.

 

To read Wisner’s complete analysis of this report go to: http://www.econ.iastate.edu/outreach/agriculture/periodicals/ifo/

 

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Contacts :

Robert Wisner, Economics, (515) 294-6310, rwwisner@iastate.edu

Jean McGuire, Continuing Education and Communication Services, (515) 294-7033, jmcguire@iastate.edu