What is in this article?:
- Analysts focus on size of 2013 U.S. corn crop
- Expecting large 2013 acreage
- Some of the elements that contribute to the price decline following a short crop are clearly occurring.
- The final, and likely the most important element, of the expected price decline is the size of the 2013 corn crop
Expecting large 2013 acreage
“For the most part, analysts are reporting expectations of even larger acreage in 2013. Those expectations appear to be near 99 million acres. The increase would come from an overall increase in row-crop acreage as some land has come out of the Conservation Reserve Program and from reductions in the acreage of less competitive crops,” Good noted.
Planted acreage of 99 million would point to acreage harvested for grain near 91.5 million acres under non-drought conditions. That would be an increase of just over four million acres from acreage harvested in 2012 when more than the usual amount of acreage was harvested for silage and abandoned, he said.
“Such acreage would point to prospects for an extremely large crop in 2013. Early-season acreage expectations, however, are often not a good forecast of actual acreage.
“Last year, for example, the USDA’s March Prospective Plantings report indicated intentions to plant 95.864 million acres of corn, nearly 1.4 million more than the average trade guess. Actual planted acreage exceeded early expectations by the trade by nearly 2.7 million acres,” Good said.
The other consideration in forming production expectations is obviously expectations for the U.S. average yield. Most base their early yield expectations on an analysis of trend yield.
“Trend yield analysis, however, is not straightforward,” he noted.
“First, average yields over any time period reflect both changing technology and variations in weather conditions. A calculation of the true technological trend in average yields requires that yield observations be ‘corrected’ for annual variations in weather conditions.
“Such correction requires the application of models that separately account for the yield impact of technology and weather. A failure to do so can result in a biased estimate of trend.”
Following three consecutive years of low corn yields, a trend calculation that does not adjust for variations in weather conditions will understate trend yield for 2013.
“A second issue surrounding trend yield calculations is the length of the time period used to calculate the trend. Different periods result in different trend calculations. We continue to think that 1960 through 2012 is the correct time period for calculating the 2013 trend yield,” he said.
Another consideration for some in forming early yield expectations is the state of soil moisture going into the planting season.
However, as we learned again last year, the yield implications of those conditions are dwarfed by the impact of growing-season weather. Although current drought conditions are of concern, those conditions alone do not provide much information about 2013 yield prospects.
“Although prices for the 2013 corn crop are currently about 70 cents below the peak reached in September 2012, they are well above the level that would be expected if the 2013 crop reached its full potential.
“Next month, the USDA will release projections for the U.S. farm sector for the next 10 years. There will be a lot of interest in the 2013 corn acreage and yield projections contained in that report,” Good said.