Despite recent weakness in corn markets, tied mainly to negative outside markets, there's little reason to expect a major price retreat. Demand is too high.
"USDA estimates that this year's corn crop will be the fourth largest ever, and it is a big crop, but demand is very strong and the U.S. will need every bushel of corn produced this year to meet the need for food and fuel and to rebuild supplies to a more comfortable level," says Todd Davis, American Farm Bureau Federation crops economist. "The story for 2012 will be the same as 2011. The U.S. will need more acreage, good yields and a bigger crop next year to meet demand and build supplies."
USDA forecasts an average U.S. yield of 146.7 bu./acre in its November report, which would be the lowest average yield since 2003. Davis believes a factor in the yield decline was early frost in the northern tier of the Corn Belt, which reduced yields by 5 bu./acre in Minnesota and 11 bu./acre in North Dakota, compared to October.
November's World Agriculture Supply and Demand Estimates (WASDE) peg 2011-12 corn production at 123 million bu. lower based on 1.4 bu./acre less estimated yield. Residual feed use was estimated 100 million bu. lower on the smaller crop, as well as an estimated decrease in broiler production. Though ending stocks for corn were estimated at 23 million bu. lower, the projected season-average farm price remained unchanged from the previous month at $6.20-$7.20/bu.
According to November's USDA Crop Production report, the total corn crop this year is projected at 12.3 billion bu., 1% less than the previous month's estimate, and also 1% less than the 2010 crop. The estimated yield of 146.7 bu./acre is 6.1 bu./acre less than in 2010. If realized, that would be the lowest average yield since 2003.
For the week ending Nov. 21, according to the National Agricultural Statistics Service:
Corn – 96% has been harvested, compared to 99% last year and 88% for average.
Sorghum – 91% is harvested, 4% less than last year but 4% more than the average.
Winter wheat – 28% has emerged, compared to 91% last year and 88% for average. 50% is in Good or Excellent condition compared to 47% a year ago. 16% is rated as Poor or Very Poor, the same as a year ago.