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• Prospects for high net returns and crop insurance revenue coverage support combined 2013 area for wheat, corn, and soybeans very near last year’s 30-year high.
Higher corn use is driven by expansion of ethanol production and, to a lesser extent, increases in corn used for starch, high fructose corn syrup, and glucose and dextrose. The recovering housing industry and industrial uses are bolstering corn use for starch. In general, domestic demand for all FSI use categories is set to increase as the economy slowly recovers. Corn sweetener exports to Mexico are expected to slip as sugar output there increases.
Corn use in ethanol production: Corn used to produce fuel ethanol in 2013/14 is projected to recover by 175 million bushels over 2012/13. The expected increase supports a forecast of 4,675 million bushes, 344 million bushels below the record set in 2010/11. The 2013/14 projection implies that 36 percent of expected corn usage will be for ethanol production compared with 40 percent in both 2011/12 and 2012/13.
Despite an expected increase in corn used in ethanol production, a total recovery to previous levels is doubtful in light of several factors. Gasoline consumption is expected to continue its decline from the 133.9 billion gallons currently projected by the Energy Information Administration (EIA) for the 2012/13 corn marketing year.
The expected decline reflects continued increases in vehicle efficiency and declines in miles driven as a result of high gas prices, weak economic recovery, and changing driver demographics. Slow growth in consumer acceptance and availability of higher (15 and 85 percent) blends for flex-fuel vehicles also limits substitution of ethanol for gasoline.
Finally, prospects for expansion in U.S. ethanol exports are limited as sugar cane ethanol production in Brazil — a major trade competitor — ramps up on expectations for a large 2013/14 sugar cane crop.
Corn exports: U.S. corn exports for 2013/14 are projected up 600 million bushels to 1,500 million. Expanded world corn area and production in 2013/14 support continued growth in global corn use. Global corn import demand is expected to jump in 2013/14 due to falling prices, continued economic expansion, and growth in animal feed demand. Expected record production in the United States will boost exportable supplies sharply and improve competitiveness.
Brazil has emerged as a formidable competitor in 2012/13, but its continued export competitiveness will depend mainly on domestic production and demand, infrastructure efficiency, and currency values.
Both Argentina and Ukraine are expected to produce and export substantial volumes once again, remaining strong competitors. China’s import demand is expected to surge as domestic animal feed use expands in the face of sharply lower global corn prices; however, much depends on relative prices and internal policies.
Corn ending stocks and farm prices: Corn ending stocks for 2013/14 are projected at 2,177 million bushels, more than triple the 2012/13 forecast. While use approaches the record high levels of 2009/10 and 2010/11, strong global competition limits the expansion in exports allowing stocks to rebuild rapidly.
The stocks-to-use ratio is projected at 16.7 percent, nearly 3 times higher than the 5.6 percent expected in 2012/13. Abundant stocks in the U.S. and other major exporting countries put substantial downward pressure on corn prices in 2013/14.
Favorable forward pricing opportunities are expected to provide some support for prices received by producers early in the 2013/14 marketing year, but harvest time cash prices are expected to fall to near $4 per bushel.
The season-average farm price is projected at $4.80 per bushel, down $2.40 from the midpoint of the record high projected range for 2012/13.
Soybean supply, demand, and price outlook for 2013/14
Soybean supplies: Soybean supplies for 2013/14 are projected at 3,545 million bushels, up 11 percent from 2012/13 as larger soybean production more than offsets lower beginning stocks and projected imports.
Soybean production is projected 13 percent higher at 3,405 million bushels mostly reflecting yield gains above last year’s drought-reduced level. Soybean plantings are projected slightly above last year as cotton plantings decline and opportunities for double-cropping increase in several of the SRW wheat states.
With normal abandonment, soybean harvested acreage is projected at 76.6 million acres, up 0.5 million from 2012.
The national average soybean yield is projected at 44.5 bushels per acre, up 4.9 bushels from last year’s drought-reduced level. The trend projection is based on a weather-adjusted yield model that accounts for temperature and rainfall during the growing season.