More acres and higher yields are expected to lead to a record corn crop this year, USDA analysts say, as higher expected returns are encouraging more producers to opt for corn over soybeans.
“We're forecasting about a 1.5 million acre increase in corn, with a similar drop for soybeans,” USDA Chief Economist Keith Collins said at the annual Agricultural Outlook Conference at Washington, D.C. “This will happen as a result of relative prices and loan rates that favor corn, plus several years of disappointing soybean yields.”
Peter Riley, agricultural economist for USDA's Farm Services Agency, says preliminary projections point to plantings of 80.5 million acres this year, with an average 139.7 bushel yield, up from 130 last year, and well above the record of 138.6 bushels in 1994. Continued drought in the Midwest states, however, could have a downward impact on the acreage/yield forecast.
The outlook for higher stocks at the end of the 2003/04 marketing year will likely push corn prices 20 cents lower than 2002, to about $2.15 per bushel.
The “big daddy” of growth in the corn sector, Riley says, will continue to be use for ethanol production. “Last year was a remarkable one for ethanol, and 2003 should be another big year. Corn use for ethanol has more than doubled since 1996.” A major factor in more ethanol use will be California's mandated switch from methyl tertiary butyl ether gasoline mixtures to ethanol, now slated for Jan. 2004.
However, several California refineries have already modified their facilities for ethanol use and others are expected to do so this year. Several other states have banned, or are trying to ban, MBTE, which is expected to add to the sharp boost in ethanol demand. As a result, ethanol producers are expanding existing facilities and building new plants as rapidly as possible.
Exports of corn could rise as much as 100 million bushels this year, he says, although there is “a lot of uncertainty,” much of which centers on China, “a big drag” on U.S. sales the last year or two.
And with very good yields, Argentina will rival China in the export sector, now ranking as the Number Two exporter of corn in the world, Riley says.
Preliminary 2003/04 forecasts by analysts with USDA's World Agricultural Outlook Board, Economic Research Service, Foreign Agricultural Service, and Farm Service Agency point to a 10,270 million bushel corn harvest and total supplies at the end of the marketing year of 11.2 billion bushels, up about 600 million.
They expect feed and residual use to increase only slightly, about 50 million bushels, but an improvement over the 275 million bushel decline last year. With a large crop pointing to lower feed prices, pork producers are expected to increase production for 2004, and broiler production is expected to increase 2 percent to 3 percent. Beef production is expected to show less of a decline than the 4 percent drop expected in 2003.
Food, seed, and industrial use in the U.S. is forecast to rise by 4 percent to 2.36 billion bushels.
U.S. corn exports, projected at 1,925 million bushels, will continue to face “strong competition” from Argentina and China, the analysts say, although the forecast 20-cents per bushel drop in the farm price should make American corn more competitive.
China's exports “are the biggest unknown” over-hanging the corn market, they note. Plantings there are expected to decline this year as some producers switch to soybeans in response to various government incentives and reduced price protection for corn. But the volume of China's corn exports will continue to largely depend on the level of government export incentives.