August 13, 2008

U.S. corn and soybean crop recovered beyond expectations

"It's been an amazing recovery for Indiana's corn crop considering the challenging weather," said Chris Hurt, Purdue Extension agriculture economist.

Hurt; Ken Klemme, Indiana State Department of Agriculture interim director; and Greg Preston, director of USDA's Indiana Office of Agriculture Statistics Service, presented crop production projections and analysis on Tuesday during the fair's annual crop briefing. The briefing followed the release of the U.S. Department of Agriculture's August crop report.

The USDA projected total U.S. corn production to be down 6 percent from 2007 at 12.3 billion bushels and soybean production to be up 15 percent at 2.97 billion bushels.

"This report shows an amazing recovery for the corn crop and we have pulled back from a crisis in food supply and crop availability," Hurt said.  "The United States is a major supplier to world markets of food.

"When you combine the tight food supplies with the flooding in June - we were just right on the edge of not having enough supply and availability."

Hurt said the numbers allow a pullback from an emergency situation. When it comes to the food versus fuel debate, he said, this report allows more confidence that there are still going to be high corn prices from any historical stretch, but there will not have to be major reductions in feeding livestock or constraints on ethanol production. 

"There's not an abundance of corn," Hurt said. "But compared to what we've been thinking the last three, four, five months, this is a blessing."

Even with corn production down, it's still 17 percent above 2006. As of Aug. 1, yields are expected to average 155 bushels per acre, up about 2.6 percent from last year. If yields hold, it will be the second highest average yield on record, behind 2004. Corn growers are expected to harvest 79.3 million acres for grain, up 350,000 acres from June but 8 percent lower than last year.

While corn production is slightly down, soybean production is up at 2.97 billion bushels. Yields are expected to average 40.5 bushels per acre, down 0.7 bushel from 2007.  If realized, this will be the fourth largest production on record. Soybean growers are expected to harvest 73.3 million acres, up 2 percent from June and up 17 percent from 2007.

"The yield numbers for soybeans reflect that the crop is just not very far along and that there's still potential to be had on beans," said Preston.

Indiana's 2008 corn production is forecast at 877.4 million bushels, with an expected yield of 164 bushels per acre. Hoosier soybean production is forecast at 255.3 million bushels, with an expected yield of 46 bushels per acre. Indiana is expected to harvest 5.3 million acres of corn and 5.5 million acres of soybeans. Corn condition is rated 67 percent in good to excellent condition, while 63 percent of soybean crop is in good to excellent condition.

Hurt said yield predictions may be a bit high for the corn crop, but soybeans still have potential to increase in yield throughout September and into October.

"The weather has been counter seasonal this year," Hurt said. "Typically the crop looks best in June and this year it looked the worst in June.

"But with the good weather we've had the last few weeks and a few rain showers, it has gotten much better. We've even seen a 30 percent drop in prices from the highest point as the weather has gotten better. This year's 2008 corn crop is priced at $5.40 per bushel."

Hurt expects to see continued downward pressure on corn prices after this report.  USDA has lowered estimates on corn by $.60 a bushel.

"It's still high for the U.S. average at $5.40, but again we had anticipated higher prices with the flooding we saw a couple of months ago," Hurt said.  "That's the bad news -prices are lower. Some producers will wonder why they didn't go ahead and price more of their crop back in June, but most producers know that high prices are not good for the livestock producers, the consumers and the world trying to feed itself, and so this makes them feel good."

Klemme said that this is a time where energy market and the agriculture market intersect.

"For every bushel or pound of agricultural production, there's a buyer for that product and because of that we are going to continue to see tight balance sheets in this new paradigm," Klemme said. "We see the response to the high prices in producers trying to maximize production on every acre they have in operation.

Writer:  Julie Douglas, (765) 496-1050, douglajk@purdue.edu

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

Greg Preston, (765) 494-8371, gpreston@purdue.edu

Ken Klemme, (317) 232-8770, kklemme@isda.in.gov

Ag Communications: (765) 494-2722;
Beth Forbes, forbes@purdue.edu
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