Both corn and soybean production for this year were cut in this month’s crop report out this morning from USDA. Corn production is forecast at 12.7 billion bushels, down 4 percent from the September forecast and down 3 percent from last year’s record production of 13.1 billion bushels. Soybean production is forecast at a record high 3.41 billion bushels, down 2 percent from September but 1 percent above last year.
The industry was expecting the corn forecast to be lowered, but it was the amount of the decrease that caught the industry by surprise, according to John Anderson, an economist with the American Farm Bureau Federation.
“This is a pretty sizable drop in production,” Anderson said. “We saw a really big drop in USDA’s forecasted average yield for corn because of adverse weather in the big corn states of Illinois, Iowa and Indiana. USDA is forecasting a national average yield of 155.8 bushels per acre, compared to 162.5 bushels per acre in September’s report. A 6.7 bushel drop in yield is pretty significant.”
On the Minneapolis Grain Exchange monthly conference call featuring commentary on the USDA report, Peter Georgantones from ITS also expressed surprise at the new forecast, predicting it will lead to $6.00/bu corn, “pretty easily now.” Market reaction was definitely higher on Friday with December corn closing up 30 cents at $5.28 a bushel, the highest in over two years.
The latest supply-demand numbers reflecting the new forecast show a decrease in stocks, increase in feed use, decrease in exports and ethanol about the same. At a seminar in Chicago promoting exports of the ethanol by-product distiller’s dried grains with solubles (DDGS), U.S. Grains Council President and CEO Tom Dorr was not too concerned about the report. “I’ve been a farmer most of my life and the thing that I know is that farmers more often than not, swim in surpluses, they love dealing with shortfalls and they’ll produce our way out of this very quickly,” Dorr said.
Increased use of corn for ethanol has created more than 30 million metric tons of DDGS, a high-value feed product for domestic and international livestock producers. Initial 2010 export projections of 6.2 million tons of DDGS will be surpassed this calendar year as the United States gears up to export approximately 8 million tons.
Listen to or download an interview that Chuck did with Dorr reacting to the report today: Tom Dorr Interview