What is in this article?:
- Corn market focusing on expected 2012 crop size
- Widely varying opinions
• Prospects of an average yield near 160 bushels would suggest that new-crop corn prices are probably low enough, while prospects for a yield of 164 bushels or higher would likely push prices marginally lower.
Widely varying opinions
Widely varying opinions about the trend in U.S. average corn yields have emerged in recent years. According to Good, "The long-term increase in average yields is associated with the development and adoption of crop production technology and crop management practices." The nature of those developments has varied over time, but there has been a steady flow of yield-enhancing technology and practices.
For the most part, variation around the trend yield reflects variation in growing season weather, although events such as pest infestations or early occurrences of freezing temperatures can have a yield effect.
Confusion about the yield impact of technology and weather can occur if there is a string of years with very favorable or unfavorable weather. In that case, the impact of weather can mistakenly be attributed to technology and give the impression that the underlying trend yield has changed.
"That appeared to have happened from 2003 through 2009 when generally favorable weather led some to believe that the underlying trend yield was increasing at a faster rate," said Good.
The reverse may have occurred recently; poor weather in 2010 and 2011 resulted in low yields following the record yield of 2009. Overall evidence suggests that the trend in U.S. average corn yields has been linear since 1960 (http://www.farmdocdaily.illinois.edu/2012/02/the_historic_pattern_of_us_cor.html).
Opinions about likely summer weather in the Corn Belt center on the El Niño/La Niña Southern Oscillation (ENSO). The Climate Prediction Center forecasts that the winter La Niña is transitioning to neutral conditions. "Historically, such a transition has usually been associated with corn yields near trend value, although deviations in both directions have occurred," said Good. Others are suggesting a transition to an El Niño and increased chances of an above-trend yield in 2012.
U.S. corn plantings are expected to increase by 2 to 3 million acres in 2012. It has been argued that the increase will occur in lower-yielding areas and therefore prove to be a drag on the U.S. average yield.
Good thinks the yield implication of increased acreage is likely to be extremely small.
"First," he said, "some of the increase in corn acreage may occur in the higher yielding areas of the eastern Corn Belt since acreage there in 2011 was below the recent peak of 2007. Second, a 2 to 3 percent increase in acreage has the potential to only marginally impact the U.S. average yield even if all the increase was in low-yielding areas."
While the 2012 yield debate will continue well into the growing season, the most logical expectation is for an average yield near the long-term trend. The trend yield for 2012 is just under 160 bushels per acre. The USDA's early forecast for 2012 is for a yield of 164 bushels.
With harvested acreage projected at 87 million acres, a 4 to 5 bushel difference in the U.S. average corn yield represents a difference of 350 to 435 million bushels in crop size. Prospects of an average yield near 160 bushels would suggest that new-crop corn prices are probably low enough, while prospects for a yield of 164 bushels or higher would likely push prices marginally lower.