Although I didn’t advertise it as such, I commissioned the guys in the office to help me write about current issues we’re working on here in the IL Corn office this week. We started out the week discussing nutrient runoff, which will become of increasing importance as the temperatures drop and farmers start applying nitrogen for next year, and we’ve talked about the EPA’s obligation to issue or not issue a Renewable Fuels Standard waiver, releasing the nation’s gasoline suppliers from a mandate to blend renewable fuels. The deadline for comments on the latter is today, by the way, if you were considering speaking out on that topic.
The issue of today is (drumroll please!) … corn yields.
It’s an issue that IL Corn can’t really do a lot about, but it’s something that we are keeping our eyes on. And today, the U.S. Department of Agriculture (USDA) released the World Agricultural Supply and Demand Estimates (WASDE) report which gives us the official prediction for average yield both by state and for the entire U.S.
The numbers are sad. Illinois is predicted to have yields averaging only 98 bushels per acre when 2011 and 2010 averages were both 157 bushels per acre. In 2009, Illinois yielded 174 bushels per acre. Truly the drought has had a major effect on our harvest.
The U.S. averages aren’t a lot better. Today’s WASDE report estimated 122 bushels per acre when last year’s average was 147.2 bushels per acre. Even the 2011 average was down … 2010 saw 152.8 bushels per acre and 2009 saw 164.7 bushels per acre.
Some in our office think that the USDA estimate is low. It is, after all, only an estimate and harvest is still underway in many Illinois counties. However, we will have a low yield this year … lower than what we expected in the spring … and the low yield will have an impact.
- The laws of supply and demand will dictate that the price of corn will be high. Higher priced feed may lead livestock producers to liquidate some of their herd in order to make it through the year on budget.
- Ethanol markets are similar. Regardless of whether or not an RFS waiver is granted, the ethanol plants will have to buy much higher priced corn. Ethanol will become more expensive as a result and won’t compete as well against petroleum. Ethanol plants may have to scale back their production.
- Foreign buyers may be able to purchase corn from other countries cheaper than they can buy it in the U.S. Exports might drop substantially.
All these forces – basically supply and demand – will cause a “rationing” of the corn supply. All of the markets for corn will just have to make it through the year until next year’s harvest can be marketed.
Interestingly enough, farmers are already looking forward to next year. That’s what’s great about farmers. This year has been horrible, but once the crop is out of the ground, they begin to look with optimism towards a new year, a new crop, and a new opportunity. So we’ll keep an eye on the yield predictions, but we’ll just deal with them and try to keep the same healthy optimism that our farmer leaders exhibit for us.