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May 13, 2003

Sky's the limit – literally – on U.S. corn production, analyst says

WEST LAFAYETTE, Ind. - American farmers produced a 10-billion-bushel corn crop only once, in 1994. The U.S. Department of Agriculture believes growers could duplicate that feat this year. A Purdue University agricultural economist agrees, as long as the forces of nature don't interfere.

Weather will determine how close the 2003 crop comes to the record 10.103 billion bushels set nine years ago, said Chris Hurt, a commodity market analyst.

"We're looking at a corn crop that, with normal yields, will be about 10.1 billion bushels," Hurt said. "That's slightly less than the crop we raised in 1994. There is the potential that we could have a record crop if we end up with just slightly better weather than what we're anticipating.

"That's a major recovery from last year's short crop – about 1 billion bushels more. We raised just 9 billion bushels last year. Last year's average yield was 130 bushels per acre and this year USDA is starting with a projection of almost 140 bushels per acre."

The USDA on Monday (5/12) released its first set of new crop estimates for corn and soybeans. Projected soybean production was nearly 2.9 billion bushels, up 125 million bushels from 2002. If realized, it would represent the second largest U.S. soybean crop on record.

USDA estimates were based on data collected prior to a series of violent storms that ripped through the Midwest and South this month. Heavy rain Friday and Saturday (5/9 and 5/10) left many Indiana fields with standing water and saturated soils. Replanting is likely in some areas.

This comes following a furious planting pace, when Hoosier farmers seeded 50 percent of their intended corn acres and 17 percent of their soybean acres by May 4.

"The early start of corn planting was quite favorable up through early May, but now we do have delays," Hurt said. "We're beginning to look at a two-crop situation. We have the early-planted corn and will now have the late-planted corn. Later corn planting, particularly as we move beyond May 20, may well lower yield potential."

On the plus side, U.S. corn exports could increase for the 2003 crop, especially if an anticipated decline in Chinese corn production occurs, Hurt said.

Hurt warned that corn prices could reach their spring highs this month and in early June before slipping in late June and July. Should expectations for a near-record crop remain intact, prices could drop sharply by late summer with harvesttime cash prices for new-crop corn at $1.90-$2 a bushel, he said.

Soybean markets could be in for a wild ride. Numerous factors could exert pressure on prices, including an ever-shrinking inventory of old-crop soybeans, the size of the 2003 U.S. crop and fierce competition from growers in South America and China, Hurt said.

"Getting through this spring and summer is the first big issue for the market," he said. "The USDA increased the export number for our current marketing year by 15 million bushels, up to a little over 1 billion bushels. The market has a real dilemma. How are we going to get through the rest of this marketing year? We already have sold all of those beans that the USDA is currently projecting – that is, 1.010 billion bushels. We can't sell any more soybeans for the rest of this marketing year, which lasts another 16 weeks."

Hurt expects harvesttime soybean prices to range from $4.80-$5 a bushel. Farmers should keep a keen eye on markets in the weeks ahead and be prepared to act, he said.

"What we anticipate now, with the planting delays that we have, is that we're going to see a market that is responsive on the upside to weather concerns and the very tight soybean stocks situation, but with an anticipation that a more normal weather year will give us lower prices – and probably sharply lower prices – by August or into September," he said. "We want to encourage producers to be looking at pricing old-crop beans over the next three weeks and getting started on their new-crop pricing opportunities, as well."

U.S. farmers are projected to plant 79 million acres of corn this spring, down slightly from a year ago, according to the USDA. Soybean acreage is expected to dip 580,000 acres, to 73.18 million acres, a 1 percent decline.

Indiana farmers intend to plant 5.7 million acres of corn and 5.6 million acres of soybeans, according to the Indiana Agricultural Statistics Service. Those numbers represent a 6 percent increase in corn acres and 3 percent decrease in soybean acres from 2002.

Writer: Steve Leer, (765) 494-8415, sleer@purdue.edu

Source: Chris Hurt, (765) 494-4273, hurtc@purdue.edu

Related Web sites:

Purdue University Department of Agricultural Economics: http://www.agecon.purdue.edu/

U.S. Department of Agriculture Crop Production Report: http://usda.mannlib.cornell.edu/reports/nassr/field/pcp-bb/2003/crop0503.txt

Purdue News Service: (765) 494-2096; purduenews@purdue.edu


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