World Agriculture Supply and Demand Estimates (WASDE) for August were another stunner.
Corn production for 2011-12 is forecast 556 million bu. lower with a reduction in harvested area and lower expected yields. The national average yield is forecast at 153.0 bu./acre, down 5.7 bu. from July's projection. Unusually high temps and below-average precipitation during July across much of the Corn Belt sharply reduced yield prospects.
Ending corn stocks are projected 156 million bu. lower at 714 million. The stocks-to-use ratio is projected at 5.4%, compared with last month's projection of 6.4%. The season-average farm price is projected at $6.20-$7.20/bu, up 70¢ on each end of the range.
Reflecting on WASDE estimates, Darrel Good, University of Illinois ag economist, points out that corn exports during the year just ending are projected at a six-year low of 1.825 billion bu. Domestic feed and residual use of corn is projected at only 5 billion bu., the smallest use in 15 years.
Based on the current USDA projection of the magnitude of old-crop corn supplies on Sept. 1, 2011, and the projected size of the 2011 crop, Good says corn consumption may have to be reduced by a small amount during the 2011-12 marketing year.
"Assuming that marketing year-ending stocks cannot be reduced below 5% of consumption, projected supplies would limit 2011-12 marketing year consumption to 13.213 billion bu., leaving year-ending stocks at 661 million bu.," Good explains.
Certainly, the actual supply of corn that will be available for use during the year ahead may differ from the current projection. The size of old-crop stocks Sept. 1 won't be known until the USDA releases the quarterly Grain Stocks report Sept. 30. The size of the 2011 corn crop will not be known until the USDA releases the final estimate in January 2012, Good says.
"Assuming that available supplies will limit corn consumption during the year ahead, two important issues emerge," Good says. "The first is: How will available supplies be allocated among the major consumption sectors? The second is: What price of corn will be needed to limit consumption to the level of available supplies?"
The WASDE report projected a further decline in exports and domestic feed and residual use of corn during the year ahead. Domestic processing use is projected to increase as ethanol production continues to expand modestly, Good says.
Corn consumption during the year ahead could be rationed by weaker demand and/or higher corn prices. Ongoing economic and financial weakness speaks to some demand weakness, but the majority of any needed rationing will likely have to come from a continuation of high corn prices, Good explains.
"What remains to be seen is how much rationing, if any, will be needed. Based on the way the growing season is ending, the size of the 2011 crop could be smaller than the August projection, requiring even more rationing than currently anticipated," Good says.
For the week ending Aug. 14, according to the National Agricultural Statistics Service:
Corn – 98% is silking, 1% less than last year and 1% more than average. 52% is at the dough stage, 19% less than last year and 6% less than average. 17% is at the denting stage, compared to 30% a year ago and 21% for average. 60% is in Good or Excellent condition, compared to 69% a year ago. 15% is rated Poor or Very Poor, compared to 11% a year ago.
Soybeans – 94% is blooming, 2% less than last year but even with the average. 70% is setting pods, 12% less than last year and 8% less than average. 61% is in Good or Excellent condition; 66% was last year.
Sorghum – 66% is headed, compared to 82% last year and 75% for average. 32% is coloring, 1% less than last year and 3% less than the average. 25% is mature, 5% more than last year and 2% more than average. 27% is in Good or Excellent condition; 64% was last year.
Winter wheat – 91% has been harvested, which is 1% more than last year and 3% less than average.
Spring wheat – 13% is harvested, which is 18% behind last year and 26% behind the five-year average. 66% is in Good or Excellent condition, compared to 82% a year ago.
Oats – 65% is harvested, 15% behind last year and 12% behind the average.
Barley – 8% is harvested, which is 17% behind last year and 29% behind normal. 68% is in Good or Excellent condition, compared to 85% last year.
Pasture – 37% of the nation’s pasture and range is rated as Good or Excellent, 16% less than at the same time last year. 39% is rated Poor or Very Poor, compared to 18% a year ago. States reporting more than 55% of pasture as Poor or Very Poor were: Arizona (57%); Arkansas (73%); Kansas (56%); New Mexico (87%); Oklahoma (91%); and Texas (96%).