The farm economy remains strong with U.S. agricultural exports, farm cash receipts and net farm income projected at or above previous record levels. Farm household debt levels appear to have stabilized despite rising land values.
"While prospects generally look bright, recent sharp hikes in prices for major crops are generating a range of concerns," Joe Glauber, USDA's chief economist told more than 2,000 participants attending USDA's annual Outlook Forum Thursday morning. One is tightening livestock margins. Another is weather U.S. agriculture will be able to produce enough to meet rising needs for food, feed and fuel.
Plantings to rise
Glauber expects U.S. farmers will plant nearly 255 million acres the major field crops (wheat, corn, barley, sorghum, oats, soybeans, rice and upland cotton in 2011), an increase of 9.8 million acres over 2010 levels.
"If this forecast is realized, planted acreage for the 8 crops would be the highest since 1998 though still well short of the more than 260 million acres planted in 1996," he says. "The net rise of 9.8 million acres would be the largest year-to-year change since 1996 when 15 million additional acres were planted to the 8 crops."
Acreage shifts likely
Fall 2020 winter wheat seedings totaled 41 million acres, up 3.7 million acres over the previous year. Yet despite a 70% rise in futures prices for spring wheat over year ago levels, spring wheat (including durum) area may fall slightly from last year's 16.3 million acres.
"High prices and more favorable net returns for oilseeds, particularly canola and soybeans in North Dakota, should discourage spring wheat expansion," explains Glauber. "This would leave total 2011 wheat area at 57 million acres, up 3.4 million acres over 2010."
Corn faces more intense competition than in 2007
Unlike 2007 through 2009, when cotton prices remained low relative to competing crops, record high cotton prices should result in more cotton acreage for 2011. Upland cotton area is forecast at 12.75 million acres for 2011, up almost 2 million acres. Improved returns could lead producers to plant cotton on cropland previously planted to corn, soybeans, sorghum, rice and other crops.
Higher prices will result in more corn planted in 2011. Corn planted area is expected to increase to 92 million acres, an increase of 3.8 million acres over 2010 levels, and the highest level since 93.5 million acres were planted in 2007.
Unlike 2007, when soybeans fell at the expense of corn, soybean area is expected to hold its own this year, rising slightly to 78 million acres.
"One reason for the rise in soybean area is an expected rebound in double cropped area," says Glauber. Because of the late harvest in 2009, 2010 winter wheat seedings were down almost 15%. Soft red winter wheat seedings were down more than 35%. As result, double cropped soybean area in 2010 totaled approximately 2.3 million acres, the lowest level since USDA's National Ag Statistics Service began reporting double cropped area in the late 1970s.
Glauber expects double cropped area to rise to 5 to 6 million acres in 2011, reflecting higher winter wheat area, particularly in the soft red winter wheat areas of the Corn Belt (up 47% from last year) where significant amounts of double-cropped soybeans have been planted in the past.
Higher expected returns for soybeans, corn and cotton will likely result in fewer acres of rice being planted in 2011. Rice planted acreage for 2010 is estimated at 2.88 million acres. If realized, this would be the smallest planted area since 2007.
Market volatility to continue
Assuming normal weather this spring and summer, production of corn, soybeans and upland cotton are expected to be up in 2011. Rice production will likely fall reflecting smaller planted area. Despite increased production of corn and soybeans, grain and oilseed markets are still forecast to be tight due to strong export demand and strong demand for biofuels. Unless this year's weather is better than normal or plantings climb more than expected, stock levels for corn and soybeans should see only modest rebuilding in 2011-12. This will likely mean continued volatility in those markets.
2011 Crop Prospects - Corn
Stocks balance to remain very tight.
Despite an anticipated 4% rise in planted acreage, the corn market will remain tight in 2011-12. Assuming harvested acreage of 84.9 million acres and a trend yield of 161.7 bushels per acre, USDA forecasts for 2011-12 corn production at a record 13.73 billion bushels.
"Because of this year's smaller carryout, total supply for 2011-12 is estimated at 14.425 billion bushels, up only 250 million bushels over 2010-11 levels," Joe Glauber, USDA's chief economist told more than 2,000 participants attending USDA's annual Outlook Forum Thursday morning.
Feed use to fall, exports and ethanol to rise
USDA projects total corn use at 13.56 billion bushels. Higher exports and higher corn use for ethanol will more than offset an anticipated reduction in feed use. Feed and residual use is anticipated to fall slightly in 2011-12 as high feed costs limit expansion in the pork and poultry sectors and beef feeding declines with tighter feeder cattle supplies.
Exports, however, are anticipated to rise to 2 billion bushels as reduced global use of feed quality wheat boosts world corn trade and consumption.
Corn use for ethanol continues to grow. Weekly ethanol production numbers suggest that ethanol production is currently running over 13.5 billion gallons on an annualized basis. "This far exceeds levels implied by the mandated levels under the Renewable Fuel Standard (12.6 billion gallons in 2011)," says Glauber. "On average, production margins for ethanol producers remain positive as many plants appear to have forward-priced their corn requirements below the recent market highs.
"Incentives for ethanol blending remains strong with the Volumetric Ethanol Excise Tax Credit in place through 2011 and ethanol expected to remain attractively priced relative to gasoline. As a result, corn use for ethanol is expected to grow further in 2011-12 to a record 5.0 billion bushels," he adds. "At this level, corn use for ethanol would account for 37% of total use and 36% of corn production."
Corn prices are forecast at a record $5.60 per bushel, $0.20 higher than the mid-point of the range forecast for 2010-11.
Stock rebuilding surge unlikely
With total supply at 14.425 billion bushels and total use at 13.56 billion bushels, ending stocks are projected at 865 million bushels in 2011-12, a modest 190-million bushel gain over the level projected for 2010-11 levels. Stocks-to-use levels will remain tight at 6.4%.
"Higher than trend yields or larger planted area could help rebuild corn stocks," notes Glauber. "But stock levels are not likely to return to recent levels over the course of one or even two seasons. For example, if 2011-12 yields were to equal the record level of 164.7 bushels per acre achieved in 2009-10, ending stocks would exceed 1.1 billion bushels. And this assumes no increase in use for feeding, ethanol, or exports, an unlikely scenario. Further, assuming this yield and no increase in usage, 2011 planted area would have to rise 8 million acres to return stocks to the 2010-11 level of 1.7 billion bushels."