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Will large crop estimates get larger?
Iowa
Recent forecasts of unusual increases in the 2004 corn and soybean harvest have raised questions of whether the crop estimates might increase still more, according to Iowa State University Extension economist Robert Wisner.
Two main indicators should be considered in answering this question, according to Wisner. The first is frost damage. The northern tier of states from Iowa and the Dakotas across Minnesota, Wisconsin, Michigan and a small part of northwest Ohio were hit by a hard freeze Oct. 2 to 4. The second is the historical record of changes in crop estimates for other years of exceptionally high yields.
Wisner said freeze damage probably was not fully reflected in October crop estimates. Rough estimates indicate corn production in affected states may have been reduced by 140-160 million bushels from earlier potential. That was after taking into account corn already harvested and the percent to be used for silage.
Wisner said state crop and weather reports indicated most soybeans in the region were at least turning yellow, if not dropping leaves. Thus, soybean losses from the frost probably were small. He added that areas of heavy rain in extreme northwest Iowa, Minnesota, and Wisconsin also are experiencing soybean losses from standing water. But impacts on U.S. production appear likely to be small.
The ISU economist said a second indicator of potential later estimates for the 2004 harvest is changes after the October crop report in similar years. For corn, this year's estimated U.S. yield is 10.3 percent above the long-run trend yield. Since 1965, there have been 10 other years when yields exceeded trend yields by 10 percent or more. Wisner noted that in all but one of these years, the corn yield estimate increased from October to the season final estimate. The largest increase was 6.1 percent in 1992. The other year was 1982, with a 0.9 percent decrease. For all of these years, the average change was a 2.6 percent increase.
The average change, with acreage at the October level, would put U.S. corn production at 11.92 billion bushels. The largest increase would push production up to an astounding 12.32 billion bushels. The low end of the range would cut production to 11.51 billion bushels. Wisner said these figures compare with last year's record corn crop of 10.1 billion bushels.
Serious shortage of storage space
If both corn and soybean yields change by the average percentage for similar years, total U.S. corn and soybean supplies will be about 1.5 billion bushels above the fall of 2000. That combination would cause a major shortage of storage space.
For soybeans, in five out of the past 39 years the U.S. yield exceeded the long-run trend yield by 7 percent or more. In four out of those five years, the yield estimate increased further from October to the season final estimate. For the other year, the yield estimate remained unchanged from October to the season final estimate. Wisner said yield changes within this range for 2004 would place the U.S. soybean crop at 3.1 to 3.22 billion bushels, up sharply from last year's 2.45 billion bushel crop.
With average yield changes for past years of sharply above-trend yields, the Economist said potential U.S. corn and soybean carryover stocks would rise to about 2.22 billion and 455 million bushels, respectively. That would be about an 11-week supply for corn and an 8.4 weeks' supply for soybeans. He added that with current farm policies, stocks significantly exceed normal working levels (three to four weeks' supply) tend to keep prices below Commodity Credit Corporation loan rates to encourage larger use.
Wisner said that for corn, 1998 through 2001 were years of similar carryover stocks. The average Iowa corn price for those years was about $1.80 per bushel. For soybeans, the average Iowa price was about $4.54 per bushel. Current U.S. Department of Agriculture projections place U.S. soybean carryover stocks 48 percent higher than the average for those years.
Date: 10/20/04
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