There will be a surplus of corn this year, just not as much as first thought. USDA estimated earlier this week a surplus of 672 million bushels of corn will carry over to next summer. USDA surmised the ending stocks could float between a 19 and 26-day supply. Anything under a 30-day reserve is considered unhealthy for the economy.
Economists say a low carryover opens the door to more market volatility, as any short-term supply disruptions can create an opportunity for prices to jump quickly.
This spring, U.S. farmers planted the second largest corn crop since World War II, but high temperatures and some dry weather stunted the potential harvest. Corn traded around $7.33 this week following the report, down from the near $8 a bushel price in June, but more than double the price last year at this time.
A more expensive corn price traditionally translates into higher food prices, as it is an ingredient in many products from cola to ketchup. It takes about six months to see the trickle down to products in the grocery aisles.
Livestock producers, who rely on corn for feed, also are feeling the pinch. Chicken producer Sanderson Farms reported this month its third straight quarterly loss, in part, to higher feed prices. The world’s largest hog producer, Smithfield Farms, also said high feed costs would continue to be a problem this year.
Overall, corn production is estimated at 12.5 billion bushels, a three percent drop from a month earlier, but slightly up over a year ago. If realized, this would be the third largest production total on record for the United States. USDA predicts an average of 148.1 bushels per acre, the lowest average yield since 2005.
The soybean crop is forecast to rise 1 percent over last month, but is off seven percent from last year earlier for a total production of 3.09 billion bushels. The average per acre figures out to be 41.8 bushels per acre, up 0.4 bushel from last month, but down 1.7 bushels from last year.
Despite farmers planting 30 percent more cotton acres this season, crop predictions are down 9 percent from last year to 16.6 million bales. That’s just a slight change from last month’s report.
Major cotton production areas are still suffering under the effects of a long-term drought. According to meteorologists, the trend could continue.
Brad Rippey, USDA Meteorologist: “Drought is expected to persist or even continue to intensify over the southern plains all the way through the autumn months, and really the only thing at this point that would provide some type of relief would be a tropical storm.”
Those tropical storms have come close to hitting the region, though not producing rain, but providing strong winds that only added fuel to the wildfires. Many areas around Bastrop County, near Austin, Texas remain under evacuation orders. To date, 190 fires have burned more than 34,000 acres, in the Lone Star State.
Tinder-dry fields and landscape have allowed for spread of the blazes. The entire region has been under the effects of a La Nina weather pattern set up in the Pacific Ocean.
Rippey: “We’re at least at a fifty fifty chance that we will slide back in to at least a moderately strong La Nina event and that could have even more devastating consequences for Texas, Oklahoma and other drought ravaged areas. We could see resurgence or intensification or a re-intensification of drought in parts of the southeast if La Nina resurfaces.”