Will Large Crop Estimates Get Larger?

There’s a serious shortage of storage space developing for this fall’s bumper corn and soybean harvest, says ISU economist. Compiled by staff

Published on: Oct 18, 2004

Recent forecasts of unusual increases in the 2004 corn and soybean harvest have raised questions of whether the crop estimates might increase still more. Two main indicators should be considered in answering this question, says Bob Wisner, Iowa State University extension economist.

The first is frost damage. The northern tier of states from Iowa and the Dakotas across Minnesota, Wisconsin, Michigan, and a small part of northwest Ohio were hit by a hard freeze Oct. 2-4. The second is the historical record of changes in crop estimates for other years of exceptionally high yields.

Wisner says the freeze damage probably was not fully reflected in the October crop estimates. Rough estimates indicate corn production in affected states may have been reduced by 140-160 million bushels from earlier potential. That was after taking into account corn already harvested and the percent to be used for silage.

This year’s U.S. corn yield is 10.3% above trend

Wisner says state crop and weather reports indicated most soybeans in the region were at least turning yellow, if not dropping leaves. Thus, soybean losses from the frost probably were small. He adds that areas of heavy rain in extreme northwest Iowa, Minnesota, and Wisconsin also are experiencing soybean losses this year because of water that stood in the fields. But the overall impact on U.S. production appears likely to be small.

The ISU economist says a second indicator of what this year’s later estimates might be (the estimates USDA will make in November and January) for the 2004 harvest is to look at the history of changes that have occurred after the October crop report in years similar to 2004.

For corn, this year's estimated U.S. yield is 10.3% above the long-run trend yield. Since 1965, there have been 10 other years when yields exceeded trend yields by10% or more. Wisner noted that in all but one of these years, the corn yield estimate increased from October to the season final estimate. The largest increase was 6.1% in 1992. The other year was 1982, with a 0.9% decrease. For all of these years, the average change was a 2.6% increase.

The average change, with acreage at the October level, would put U.S. corn production at 11.92 billion bushels for 2004. The largest increase would push production up to an astounding 12.32 billion bushels. The low end of the range would cut production to 11.51 billion bushels. Wisner says these figures compare with last year's record corn crop of 10.1 billion bushels.

Serious shortage of storage space this fall

If both corn and soybean yields change by the average percentage for similar years, total U.S. corn and soybean supplies will be about 1.5 billion bushels above the fall of 2000. That combination would cause a major shortage of storage space.

For soybeans, in five out of the past 39 years the U.S. yield exceeded the long-run trend yield by 7% or more. In four out of those five years, the yield estimate increased further from October to the season final estimate. For the other year, the yield estimate remained unchanged from October to the season final estimate. Wisner says yield changes within this range for 2004 would place the U.S. soybean crop at 3.1 to 3.22 billion bushels, up sharply from last year's 2.45 billion bushel crop.

With average yield changes for past years of sharply above-trend yields, the ISU economist says potential U.S. corn and soybean carryover stocks would rise to about 2.22 billion and 455 million bushels, respectively. That would be about an 11-week supply for corn and an 8.4 weeks' supply for soybeans. He notes that with current farm policies, stocks significantly exceed normal working levels (three to four weeks' supply) tend to keep prices below Commodity Credit Corporation loan rates to encourage larger use.

Wisner says for corn, 1998 through 2001 were years of similar carryover stocks. The average Iowa corn price for those years was about $1.80 per bushel. For soybeans, the average Iowa price was about $4.54 per bushel. Current USDA projections place U.S. soybean carryover stocks 48% higher than the average for those years.