A Purdue agricultural economist and state agricultural officials at the Indiana State Fair on Wednesday (Aug. 12) were surprised at the abundant 2009 crop projected by a U.S. Department of Agriculture report, especially given the difficult time farmers throughout the Eastern Corn Belt had getting their crops planted this spring.
The USDA's Crop Production Report has U.S. corn production at 12.8 billion bushels, up 5 percent from 2008. Soybean production is estimated at 3.2 billion bushels, up 8 percent from this past year, while wheat production is estimated at 2.18 billion bushels, 3 percent higher.
Indiana corn production is forecast at 903 million bushels, up 3 percent from 2008, with an expected yield of 163 bushels per acre. There was virtually no change in soybean production, which is estimated at 245.6 million bushels with an expected yield of 45 bushels per acre. Both Indiana corn and soybeans were rated as 66 percent in good to excellent condition.
Panelists at the annual crop report briefing, held in Indianapolis at the Pioneer Our Land Pavilion on the fairgrounds, were Chris Hurt, Purdue Extension ag economist; Greg Preston, director of the National Agricultural Statistics Service office in Indiana; and Anne Hazlett, director of the Indiana State Department of Agriculture. Jay Akridge, Purdue's Glenn W. Sample Dean of Agriculture, moderated the panel.
Preston led off the discussion with a brief summary of the season and crop progress.
"It's amazing that farmers even got the crop in the ground," Preston said. "By mid-May only a quarter of the crop was in the ground."
At that time, planting progress in Indiana was two weeks behind last year and three weeks behind the five-year average, he said.
"The crop abundance reflected in the report is truly a testament to the science and technology farmers and agribusinesses are using," Hazlett said.
Purdue's Hurt added that Indiana had a difficult start to the crop year because of the late planting, which put crops in jeopardy. But the USDA report, he said, puts that aside with increased crop production across the board.
"The cool weather we had in July was really a good thing for the crop this year," Hurt said. "The numbers for corn yields were higher than what the market was expecting by about two bushels. "If this crop comes through, we could be looking at record yields. I expect to see a 5- to 7-cent drop on the corn market based on this report."
Even with a drop in corn prices, Hurt said a livestock sector expansion is unlikely. But he did say it could stimulate the ethanol industry.
"The big question that will determine whether we can turn some of those ethanol plants back on is the blending wall with E10," Hurt said. "Whether the EPA does or does not allow us to go to E15 is going to be critical in this market."
E10 is made up of 10 percent ethanol.
The USDA lowered its monthly corn price estimate by about 25 cents per bushel. It estimated an average price of $3.50 for the 2009 crop, compared to an average of $4.05 for the 2008 corn crop.
For the 2008 crop, soybeans had an average price of about $10 per bushel. USDA has soybeans marked at $9.40 for the 2009 crop.
"On soybeans, they're saying that's where we have the most vulnerability, the yields and production could still come down," Hurt said.
But Hurt said he thinks that's also where the most opportunity lies.
"Favorable August and September weather could still add to these bean yields and give us even lower prices," Hurt said. "Regardless, corn and bean prices are lower, and I think producers will quickly tell you, "Unfortunately, I have lower prices, but my costs of production were higher.'"
Hurt also touched upon farm income from corn. Indiana saw record farm income in 2008 of $3.2 billion, compared to the previous 10-year average of $1.3 billion.
"Looking back to 2008, farm income was highly dominated by crop farmers," Hurt said. "We know that 2008 and, continuing into 2009, hog and dairy farms are losing money."
Hurt said margins this year will be much narrower for crop producers, and average farm income will be much lower.
"Prices will be more in the $1 billion range or sub-$1 billion - more like normal income for 2009," Hurt said.
He also said that USDA did increase its utilization estimate for the 2009 crop. The projection was better than expected, neutralizing some of the bearishness on production being larger than anticipated.
Hurt summed it up by saying that often when a crop is very good that crop will "grow."
"Big crops get bigger," he said. "If there is sufficient pollination, that means good fill and good test weights and good yields. We could see record high yields before we are done with this crop, which means lower prices. Regardless, corn and soybean prices are lower."