The latest estimates from the U.S. Department of Agriculture show lower-than-normal corn and soybean yields across the nation, with the biggest crop losses in Indiana.
This is the second consecutive year for national crop yields below the expected average, straining already tight world grain supplies and keeping commodity prices high, said Purdue Extension agricultural economist Chris Hurt.
According to the USDA's National Agricultural Statistics Service September Crop Production report, released Monday (Sept. 12), national corn yields could average 148.1 bushels per acre, down about 13 bushels from trend yields. Soybeans followed suit at 41.8 bushels per acre,down 1.5 to 2 bushels from trend.
In Indiana, a state hit hard by spring floods and summer drought, average projected corn yields are 145 bushels per acre, down from trend yields of near 165.
"When we're talking about lower commodity prices, a loss of 20 bushels per acre doesn't seem quite as bad," Hurt said. "But when we have corn prices in the $7 range, that's a big hit."
The news on soybeans in Indiana was slightly better, with projected yields at 42 bushels per acre, down 6 bushels from what they might have been with normal weather.
Yields that low will keep world grain stocks very tight, Hurt said. By August 2012 predicted U.S. stocks of both corn and soybeans look to be around a bare minimum of just a 19-day supply. That means usage has to be reduced, and prices are likely to climb until they reach a point where end users, such as processors and livestock producers, are forced to reduce consumption.
"End users of corn will have to cut back by about 400 to 500 million bushels, which primarily will come from 300 million bushels in livestock feed and a 185-million-bushel cut in exports," Hurt said. "There will have to be some cutbacks in soybean use, as well – the USDA says 110 million bushels, mostly from an 85 million bushel reduction in exports."
The major wildcard in whether soybean stocks continue to shrink is the South American crop, which is being planted now. Should South America have favorable weather, Hurt said the crop could make up for the shortages from the U.S. yields. This is especially true since farmers in countries such as Argentina and Brazil will grow more acres of soybeans than in previous years.
"The amount of Chinese soybean purchases will be up 9 percent this year," he said. "South American exports will increase, as both Argentina and Brazil have about 5 percent more acres and should return to more normal yields after a 5 percent below-trendline yield last year. South America will cover all of the new purchases from China."
If the weather in South America holds up, farmers in the United States can expect to see soybean prices remain strong through Thanksgiving, Hurt said. After that, prices could be fairly flat through the winter. However, unfavorable growing conditions in South America would send prices up quickly.
USDA currently expects the U.S. average farm price for soybeans to range from $12.65 to $14.65 per bushel.
"Prices are expected to provide a positive return for on-farm storage into December or January, but maybe not beyond," Hurt said. "Commercial storage may not pay this year, especially if the South American crop is large."
Corn farmers also aren't likely to see a profit from commercial storage. USDA projects average farm prices for corn at a record high $6.50 to $7.50. Hurt said on-farm storage looks profitable into spring and early summer, with prices rising more than enough to cover storage costs.
The full USDA-NASS report is available for free download at http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1046