On May 10, 2013 the United States Department of Agriculture (USDA) released its May Crop Production report from the National Agricultural Statistics Service (NASS), and the World Agricultural Supply and Demand Estimates (WASDE) report from the World Agricultural Outlook Board (WAOB).  In the May WASDE report the USDA made its first projection of 2013 U.S. corn, grain sorghum, wheat and soybean production with associated supply-demand balance sheets and prices for the “new crop” 2013/14 marketing year (i.e., MY 2013/14).  “New crop” MY 2013/14 runs from September 1, 2013 through August 31, 2014.  

USDA Projections for “New Crop” MY 2013/14: The USDA projected that 2013 U.S. corn production would climb to a record high 14.140 billion bushels (bb) – up from a drought-affected short crop of 10.780 bb in 2012.  This projection is based on record high planted acreage of 97.3 million acres (ma), 89.5 ma harvested, and an average U.S. corn yield of 158.0 bushels per acre (bu/ac).   This U.S. corn yield projection of 158.0 bu/ac is down from the USDA projection of 163.6 bu/ac by the USDA at its February 22^nd Outlook Forum due to planting delays that have occurred in the U.S. in late April-early May 2013. 

Following from this projection of larger 2013 U.S. corn production, the USDA projected larger total supplies (14.924 bb – up from 11.894 bb in “old crop” MY 2012/13), corn use for ethanol production (4.850 bb – up from 4.600 bb a year ago), non-ethanol food, seed and industrial use (1.445 bb – up from 1.385 bb), exports (1.300 bb – up from 985 million bushels or ‘mb’), and feed and residual use (5.325 bb – up from 4.400 bb) for “new crop” MY 2013/14.  As a result of these supply and demand forecasts, the USDA projected higher “new crop” MY 2013/14 U.S. corn ending stocks (2.004 bb – up from 759 mb last year), and % ending stocks-to-use (15.51% - up from 6.82% in “old crop” MY 2012/13).   Due to more abundant available supplies relative to demand, the USDA projected U.S. average corn prices for “new crop” MY 2013/14 of $4.30-$5.10 bu/ac (midpoint = $4.70), down considerably from $6.70-$7.10 in “old crop” MY 2012/13. 

KSU Projections for “New Crop” MY 2013/14: Kansas State University projections of U.S. corn supply-demand balances for “new crop” MY 2013/14 indicate that with the likelihood of record large U.S. corn planted and harvested acreage in 2013, if either “trendline” or “above trendline” U.S. corn yields occur in the coming year a significant rebuilding of in U.S. corn ending stocks and sharply lower U.S. corn prices would result by fall 2013 and on into “new crop” MY 2013/14. 

In assessing the uncertainties associated with 2013 corn growing conditions in the U.S. Corn Belt (particularly in the western states), it is estimated here that there is an 80% chance of trendline or higher U.S. corn yields with production of 14.087-14.740 bb projected for 2013, with U.S. corn % ending stocks-to-use in the range of 14.2%-16.1%, and prices in the range of $3.40-$4.70 per bushel for “new crop” MY 2013/14.  However, there is an estimated 20% chance of a short U.S. corn crop in 2013 of 11.820 bb, with % ending stocks-to-use of 6.5%, and U.S. average corn prices in the range of $6.60-$7.60 per bushel. 

USDA Projections for “Old Crop” MY 2012/13: For the “old crop” 2012/13 marketing year, the USDA raised its projection of corn ethanol usage (4.600 bb – up 50 mb), but lowered its forecast of exports (750 mb – down 50 mb), and non-ethanol feed, seed and industrial use (1.385 bb – down 2 mb).  A marginal increase is projected for ending stocks (759 mb – up 2 mb) and percent ending stocks-to-use (6.82% - up from 6.80% last month).  The USDA narrowed by $0.05 per bushel on each end of the range its projection of “old crop” MY 2012/13 U.S. average farm prices for corn to $6.70-$7.10, with a range midpoint of $6.90 per bushel.     

With a) the near record tightness of U.S. corn supplies in “old crop” MY 2012/13, b) potential concerns about late planting and declining U.S. corn production prospects, and c) the historic predominance of U.S. corn production in World feedgrain export markets, U.S. corn prices are likely to remain high from now through the early summer months of 2013.  Both the anticipated tightness of U.S. corn supplies during June-August 2013 and concerns about potential 2013 U.S. corn production problems are likely to be support U.S. corn prices through the summer months, and lead to increasingly volatile markets through fall 2013. 

The USDA National Agricultural Statistical Service (NASS) used the March 28^th USDA Prospective Planting report projection of a record high U.S. corn planted area of 97.282 million acres (ma) in 2013 – just above 97.155 ma in 2012 (see Figure 1 and Table 1).  The USDA also projected that 2013 U.S. corn harvested area would be a record high 89.494 ma – also up from the previous high of 87.375 ma in 2012.  This would amount to a harvested-to-planted acreage ratio of 92.0%, which compares to the 2000-2012 average of 91.0% and a median of 91.1% - ranging from a low of 87.9% in 2002 to a high of 92.5% in 2007.   

Planted acreage scenarios representing both the lower (95.2 ma planted / 86.7 ma harvested) and upper (99.3 ma planted / 90.4 ma harvested) ends of the USDA Prospective Planting report 67% confidence range (i.e., +/- 2.1% of the 2013 projection of 97.282 ma planted) are also shown in Figure 1. 

Figure 1. U.S. Crop Planted Acreage (1973-2012) and USDA Projections for 2013

USDA projected 2013 U.S. corn yields of 158.0 bu/ac – based on “a weather adjusted trend, lowered to reflect the asymmetric yield response to July precipitation and the slow pace of planting progress as of early May” (Quote from May 10^th WASDE report) (Figure 2).  If achieved, this would be the third highest U.S. corn yield on record, following 160.3 bu/ac in 2004, and 164.7 bu/ac in 2009, and up sharply from the drought-affected 2012 yield of 123.4 bu/ac.    

KSU Projections of 2013 U.S. Corn Yield

For 2013, the 1973-2012 U.S. corn trend yield projection (with the U.S. 2012 yield of 123.4 bu/ac and all other years included) would be approximately 157.4 bu/ac.  Kansas State University yield projections for 2013 of low yields (130 bu/ac), trendline yields (157.4 bu/ac) and the historic high yields of 164.7 bu/ac in 2009 are shown in Figure 2, along with the May 10^th USDA WASDE report projection of 158.0 bu/ac.

Figure 2. U.S. Corn Yield Trend (1973-2012) and Projections for 2013

USDA 2013 U.S. Corn Production Forecast: The USDA used the March 28^th USDA Prospective Planting report projection of 97.282 million acres of corn planted in the U.S. in 2013, with 89.494 ma harvested, and a U.S. average yield of 158.0 bu/ac for a projection of 2013 U.S. corn production of 14.140 billion bushels (bb) (Table 1).

KSU Projections of 2013 U.S. Corn Production

Kansas State University projections using the same planted and harvested (89.494 ma) acreage forecasts as the USDA, with a 1973-2012 U.S. corn trend yield projection of 157.4 bu/ac for 2013, would equate to 14.087 bb of corn in 2013 (Table 1).  Alternatively, if a “yield potential” oriented 2013 U.S. corn yield of 164.7 bu/ac is achieved with 89.494 million planted acres, then 2013 U.S. corn production would equal 14.740 bb.   However, if another short crop yield of 135.0 bu/ac is produced on 87.554 ma in the U.S. in 2013, with a lower harvested-to-planted ratio of 90.0% to reflect the impact of potential drought on harvested acreage (vs 92.0% for the higher yielding scenarios) then the coming year’s corn production would be 11.820 bb.   

A year ago in its May 2012 WASDE report the USDA projected 95.9 ma of U.S. corn plantings, 89.1 ma of corn to be harvested, 166.0 bu/ac, and 2013 U.S. corn production of 14.790 bb – which is comparable to the KSU “trendline” projection of 14.087 bb and the USDA’s MAY 2013 WASDE projection of 14.140 bb (Table 1).      

With projected “new crop” MY 2013/14 beginning stocks of 759 mb, 2013 production of 14.140 bb, and imports of 25 mb, total supplies of U.S. corn are projected by the USDA to be 14.924 bb for “new crop” MY 2013/14 in the May WASDE report (Table 1).  The “new crop” 2013/14 marketing year (i.e., MY 2013/14) runs from September 1, 2013 through August 31, 2014.

Beginning Stocks: The estimate of “new crop” MY 2012/13 beginning stocks of 759 mb is down from 989 mb in “old crop” MY 2012/13, 1.128 bb in MY 2011/12, and is comparable to 850 mb in MY 1993/94, the longer term low of 426 mb in MY 1996/97, 883 mb in MY 1997/98, and 958 mb in MY 2004/05. 

Imports: The USDA’s projection of “new crop” MY 2013/14 U.S. corn imports of 25 mb is down from 125 mb “old crop” MY 2012/13, and compares to 29 mb in MY 2011/12 and to 28 mb in MY 2010/11.  High corn prices and limited availability of current domestic corn supplies have pushed U.S. corn imports sharply higher in “old crop” MY 2012/13 (Table 1).    

Total Supplies: The USDA’s May projection of “new crop” MY 2013/14 U.S. corn total supplies of 14.140 bb is up sharply from 11.894 bb in “old crop” MY 2012/13, and up from 12.360 bb in MY 2011/12, and is above the range of 12.092 – 13.038 bb over the MY 2007/08 through MY 2010/11 period (Table 1). 

KSU Projections of U.S. Corn Total Supplies in “New Crop” MY 2013/14

Based on KSU forecasts of potential U.S. corn acreage, yield and production scenarios, probability weighted KSU projections of 2013/14 U.S. corn marketing year total supplies are provided in Table 1.  Given weather and soil moisture information available at this time from climatologists, and the author’s judgment, probabilities of alternative U.S. corn yield scenarios are provided – with a leaning toward “mean reversion” in markets and weather patterns.  “Mean reversion” is the idea that various physical and economic processes tend to revert to their average values over time.  In the case of U.S. corn yields, the average yield over time would be equal to the long term trend.

Based on KSU projections, the likelihood of a drought-induced “short crop” in 2013 is estimated to be 20%.  The likelihood of an average or trendline yield crop is put at 70% in the coming year.  Finally, the likelihood of an above average or over the trendline yield crop is put at 10% in the coming year.  Overall, the likelihood of either an average trendline yield or greater than average / over trendline yield U.S. corn crop in 2013 is projected to be 80%.

For KSU projections, it is assumed that a) U.S. corn beginning stocks for “new crop” MY 2013/14 equal projected ending stocks for “old crop” MY 2012/13 of 759 mb, and b) that “new crop” MY 2013/14 U.S. corn imports would remain strong should a short crop occur in 2013 (i.e., imports = 75 mb), but drop off sharply to minimal levels (i.e., 15-25 mb) should either the “average trendline yield” or “over trendline yield” crop scenarios occur. 

The KSU projections indicate that in 2013 there is 1) a 20% likelihood of a 11.820 bb corn crop with MY 2013/14 total supplies of 12.354 bb, 2) a 70% likelihood of a 14.087 bb corn crop with MY 2013/14 total supplies of 14.871 bb, and 3) a 10% likelihood of a 14.740 bb corn crop with MY 2013/14 total supplies of 15.514 bb (Table 1a).  These forecasts compare to the May 10^th USDA WASDE projection of a 14.140 bb U.S. corn crop in 2013, leading to total supplies of 14.924 bb in “new crop” MY 2013/14.   

For “new crop” MY 2013/14, in response to projected increases in available supplies, the USDA increased is projection of U.S. corn use over the previous year in all major categories.  In response to a 25% increase in total U.S. corn supplies in the “new crop” 2013/14 marketing year, the USDA projected an increase of 73.3% in exports, an increase of 21.0% in feed and residual use, an increase of 5.4% in corn ethanol use, an increase of 4.3% in non-ethanol food, seed and residual use, and an increase of 16.0% in total use of U.S. corn (Table 1 & Figure 3).   The USDA also made several changes in its estimates of “old crop” MY 2012/13 usage, with increased corn ethanol use offset by lower exports.

Table 1. U.S. Corn Supply-Demand Balance Sheet: MY 2007/08 – “New Crop” MY 2013/14
(May 10, 2013 USDA WASDE & KSU Projections)

Item	2007/08	2008/09	2009/10	2010/11	2011/12	2012/13	USDA May 2013 WASDE 2013/14	KSU Low Yield-Production 2013/14	KSU Trend Yield-Production 2013/14	KSU High Yield-Production 2013/14
% Probability of Occurring								20%	70%	10%
Planted Area (million acres)	93.5	86.0	86.4	88.2	91.9	97.2	97.3	97.3	97.3	97.3
Harvested Area (million acres)	86.5	78.6	79.5	81.4	84.0	87.4	89.5	87.6	89.5	89.5
% Harvested/Planted Area	92.5%	91.4%	92.0%	92.4%	91.4%	89.9%	92.0%	90.0%	92.0%	92.0%
Yield / harvested acre (bu/ac)	150.7	153.9	164.7	152.8	147.2	123.4	158.0	135.0	157.4	164.7
	million bushels
Beginning Stocks	1,304	1,624	1,673	1,708	1,128	989	759	759	759	759
Production	13,038	12,092	13,092	12,447	12,360	10,780	14,140	11,820	14,087	14,740
Imports	20	14	8	28	29	125	25	75	25	15
Total Supply	14,362	13,729	14,774	14,182	13,516	11,894	14,924	12,354	14,871	15,514
Ethanol for fuel Use	3,049	3,709	4,591	5,019	5,011	4,600	4,850	4,600	4,850	4,950
Non-ethanol Food, Seed & Industrial Use	1,393	1,316	1,370	1,407	1,428	1,385	1,445	1,400	1,445	1,465
Exports	2,437	1,849	1,980	1,834	1,543	750	1,300	1,000	1,400	1,450
Feed & Residual Use	5,858	5,182	5,125	4,795	4,545	4,400	5,325	4,600	5,325	5,500
Total Use	12,737	12,056	13,066	13,055	12,527	11,135	12,920	11,600	13,020	13,365
Ending Stocks	1,624	1,673	1,708	1,128	989	759	2,004	754	1,851	2,149
% Ending Stocks-to-Use	12.8%	13.9%	13.1%	8.6%	7.8%	6.8%	15.5%	6.5%	14.2%	16.1%
U.S. Corn Average Farm Price ($/bushel)	$4.20	$4.06	$3.55	$5.18	$6.22	$6.70-$7.10 ($6.90)	$4.30-$5.10 ($4.70)	$6.60-$7.60 ($7.10)	$3.70-$4.70 ($4.20)	$3.40-$4.40 ($3.90)

 

Figure 3. Trends in U.S. Corn Use & Ending Stocks: MY 2004/05-2013/14
(May 10, 2013 USDA WASDE)

 

Ethanol Use = 4.850 bb for “new crop” MY 2013/14:  The USDA projected that U.S. corn ethanol use in “new crop” MY 2013/14 would be 4.850 bb, up 250 mb from 4.600 bb in “old crop” MY 2012/13, and compares to the near record high of 5.011 bb in MY 2011/12, the record high of 5.019 bb in MY 2010/11, 4.591 bb in MY 2009/10, 3.709 bb in MY 2008/09, and 3.049 bb in MY 2007/08 (Table 1 & Figure 3).  Ethanol usage in “old crop” MY 2012/13 of 4.600 bb is up 50 mb from the April WASDE forecast.

Figure 4. Weekly U.S. Oxygenate Plant Production of Fuel Ethanol & Estimated Corn Use:              
June 4, 2010 to May 3, 2013 (Source: U.S. Energy Information Administration)

Comments on recent U.S. ethanol production trends:  During the “old crop” 2012/13 marketing year, weekly U.S. ethanol production declined to as low as 785 th bls/d in late September, but was in the 797-825 th bls/d range in October, increasing to the range of 803-835 th bls/d in November, to 807-824 th bls/d in December, to 770-826 th bls/d in January 2013, to 770-797 th bls/d in February, but up to 797-807 th bls/d in March, and 832-857 th bls/d in April, and 843 th bls/d in early May (Figure 4).  See the Energy Information Agency data on weekly U.S. ethanol production at this web address: http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W_EPOOXE_YOP_NUS_MBBLD&f=W.

United States’ ethanol production has averaged 812 th bls/d since early September 2012 – the beginning of the “new crop” 2012/13 marketing year.  This level of ethanol production equals 34.102 million gallons per day.  If projected on an annual basis, this projects to 12.447 billion gallons per year.   To produce this much ethanol it would require 4.526 bb of corn on a 12 month basis (assuming 2.75 gallons of ethanol are produced per bushel of corn) – being below the USDA’s May 2013 projection of 4.600 bb corn usage for “old crop” MY 2012/13.

Non-ethanol Food, Seed & Industrial Use = 1.445 bb in “new crop” MY 2013/14:  The USDA projected non-ethanol food, seed and industrial (FSI) use of corn in “new crop” MY 2013/14 at 1.445 bb, up from 1.385 bb in “old crop” MY 2012/13, but down from 1.428 bb in MY 2011/12 and 1.407 bb in MY 2010/11 (Table 1 & Figure 3).  Non-ethanol FSI use in “old crop” MY 2012/13 was lowered 2 mb to 1.385 bb from the April WASDE.   

Export Use = 1.300 bb in “new crop” MY 2013/14: The USDA projected that “new crop” MY 2013/14 U.S. corn exports would be 1.300 bb, up from 750 mb in “old crop” MY 2012/13, but still down from 1.543 bb in MY 2011/12, 1.834 bb in MY 2010/11, 1.980 bb in MY 2009/10, 1.849 bb in MY 2008/09, and 2.437 bb in MY 2007/08.  Exports of 750 mb in “old crop” MY 2012/13 are down 50 mb from April, and the smallest amount of U.S. corn exports since 1.227 bb in MY 1985/86 (Table 1 & Figure 3).   

Comments on U.S. Corn Export Pace to date in “old crop” MY 2012/13: As of May 2^nd, with 35 of 52 weeks (67.3%) of the “old crop” 2012/13 marketing year complete, 500.5 mb of U.S. corn had been shipped for export – equal to 66.7% of the USDA’s updated projection for “old crop” MY 2012/13 of 750 mb.  United States’ export shipments will need to average 14.7 mb per week to attain the USDA’s projection of 750 bb in the current “old crop” marketing year.  United States’ corn export shipments during the weeks ending April 25^th and May 2^nd were highly variable at 15.9 mb and 7.6 mb, respectively.

On May 2^nd an additional 163.4 mb of U.S. corn had been sold for future export sales yet to be shipped in the “old crop” 2012/13 marketing year.  Adding together 500.5 mb in past shipments plus 163.4 mb in forward sales amounts to 663.9 mb, or 88.5% of the USDA’s 750 mb U.S. corn export target for “old crop” MY 2012/13 as projected in the May 10^th USDA WASDE report with 67.3% (35/52 weeks) of the marketing year completed.  

Feed & Residual Use = 5.325 bb in “new crop” MY 2013/14:  The USDA projected U.S. corn feed and residual use in “new crop” MY 2013/14 to be 5.325 bb, up from 4.400 bb in “old crop” MY 2012/13, and comparable to 4.545 bb in MY 2011/12, 4.795 bb in MY 2010/11, and 5.125 bb in MY 2009/10.   Additional indirect consumption of U.S. corn through ethanol production co-products (i.e., distillers grains and solubles or “DDGS”) is illustrated in Figure 5 and the accompanying section below.

Accounting for Ethanol Distillers Grains in Corn-Equivalent Livestock Feed & Export Use

Assuming 17.75 pounds of distillers dried grains and solubles (DDGS) per 56 pound bushel of corn used in ethanol production, the USDA’s projection of 4.600 bb U.S. corn ethanol production in “old crop” MY 2012/13 implies that as much as 81.650 million pounds or an equivalent of 1.458 billion corn equivalent bushels of DDGS (in 56 pound bushels weight-wise) could be available for either domestic U.S. feed use or exports. 

If 300-325 mb of DDGS corn-equivalent bushels are exported, then the remaining 1.133-1.158 mb of DDGS would be available for U.S. domestic livestock feeding in “old crop” MY 2012/13.  Figure 5 illustrates this relationship between DDGS corn equivalent U.S. domestic livestock feeding and DDGS exports as well as other categories of U.S. corn usage since MY 1989/90.

Total Corn Use = 12.920 bb in “new crop” MY 2013/14: The USDA projects that U.S. total use of corn in “new crop” MY 2013/14 will be 12.920 bb, up from 11.137 bb in “old crop” MY 2012/13, and comparable to 12.527 bb in MY 2011/12, 13.055 bb in MY 2010/11, 13.066 bb in MY 2009/10, 12.056 bb in MY 2008/09 and 12.737 bb in MY 2007/08.

Figure 5. U.S. Corn Supply-Demand with DDGS Adjustments
(May 10, 2013 USDA WASDE)

The USDA projected “new crop” MY 2013/14 U.S. corn ending stocks to be 2.004 bb, up from 759 mb in “old crop” MY 2012/13, 989 mb in MY 2011/12, 1.128 bb in MY 2010/11, and 1.708 bb in MY 2009/10.  The “old crop” 2012/13 marketing year total of 759 mb was up 2 mb from April, and is the smallest amount of U.S. corn marketing year ending stocks since 850 mb in MY 1993/94, 426 mb in MY 1995/96, and 883 mb in MY 1996/97.  (Table 1 & Figure 3)

The “new crop” MY 2013/14 projection of 2.004 bb ending stocks relative to 12.920 bb total use equals 15.5% ending stocks-to-use, up from 6.8% for “old crop” MY 2012/13, 7.9% for MY 2011/12, 8.6% for MY 2010/11, 13.1% in MY 2009/10, and the record low of 5.0% in MY 1995/96 (Table 1 & Figure 6).  If realized, this would be the largest amount of U.S. corn % ending stocks-to-use since 20% and 17% during MY 2004/05 and MY 2005/06, respectively. 

In its May WASDE report, the USDA forecast that “new crop” 2013/14 marketing year average corn prices would be in the range of $4.30-$5.10 per bushels (midpoint = $4.70).  This compares to the record high of $6.90 in “old crop” MY 2012/13, $6.22 in MY 2011/12, $5.18 in MY 2010/11, and $3.55 per bushel in MY 2009/10 (Table 1 & Figure 6). 

KSU Projected U.S. Corn Supply-Demand Balances and Prices for “New Crop” MY 2013/14

Based on potential U.S. corn planted and harvested acreage, yield and production scenarios, KSU probability weighted projections of “new crop” 2013/14 U.S. corn marketing year usage, ending stocks and prices are provided in Table 1 & Figure 6 along with the USDA’s May WASDE projection. . The following probability-based U.S. corn supply-demand scenarios are based on the author’s best judgment regarding the responsiveness of U.S. corn use and prices to varying amounts of total U.S. corn supplies in the coming “new crop” 2013/14 marketing year.

Figure 6. U.S. Corn Ending Stocks vs U.S. Avg. Cash Prices: MY 1973/74-Projected 2013/14                                
(May 10, 2013 USDA WASDE Report, KSU & USDA projections for “new crop” MY 2013/14)

A.       “Short Crop” Scenario for “new crop” MY 2013/14: 6.5% S/U & $6.60-$7.60 /bu (20% chance)

Earlier analysis in this article indicated that there is a 20% likelihood of 2013 U.S. corn plantings of 97.3 ma, 87.6 ma harvested, 135 bu/ac yields, and 11.820 bb of production (Table 1 & Figure 6).  Based on projected total supplies of 12.354 bb and total use of 11.600 bb, ending stocks are forecast to be 754 mb with ending stocks-to-use of 6.5%.  Based on recent history of the relationship between U.S. corn % ending stocks-to-use and U.S. season average corn prices, 6.5% stocks-to-use would lead to U.S. corn prices in the range of $6.60-$7.60 per bushel (midpoint of $7.10).

B.      “Trend Yield” Scenario for “new crop” MY 2013/14: 14.2% S/U & $3.70-$4.70 /bu (70% chance)

Earlier estimates projected that there is a 70% likelihood of 2013 U.S. corn plantings of 97.3 ma, 89.5 ma harvested, 157.4 bu/ac yields, and 14.087 bb of production (Table 1 & Figure 6).  Based on projected total supplies of 14.871 bb and total use of 13.020 bb, ending stocks are forecast to be 1.851 bb with ending stocks-to-use of 14.2%.  Based on recent history of the relationship between U.S. corn % ending stocks-to-use and U.S. season average corn prices, 14.2% stocks-to-use would lead to U.S. corn prices in the range of $3.70-$4.70 per bushel (midpoint of $4.20).

C.      “Trend-Plus Yield” Scenario for “new crop” MY 2013/14: 16.1% S/U & $3.50-$4.50 /bu (10% chance)

Previous estimates indicated that there is a 10% likelihood of 2013 U.S. corn plantings of 97.3 ma, 89.5 ma harvested, 164.7 bu/ac yields, and 14.740 bb of production (Table 1 & Figure 6).  Based on projected total supplies of 15.515 bb and total use of 13.365 bb, ending stocks are forecast to be 2.149 bb with ending stocks-to-use of 15.5%.  Based on recent history of the relationship between U.S. corn % ending stocks-to-use and U.S. season average corn prices, 16.1% stocks-to-use would lead to U.S. corn prices in the range of $3.50-$4.50 per bushel (midpoint of $4.00).

Combining the “Trendline Yield Crop” and “Over Trendline Yield Crop” scenarios together, for MY 2013/14 there is estimated to be a 80% likelihood of 2013 U.S. corn production of 14.087-14.740 bb, with ending stocks in the range of 1.851-2.055 bb, ending stocks-to-use of 14.2%-16.1%, and U.S. corn prices in the range of $3.50-4.70 per bushel.

D.      USDA “Large Crop” Scenario for “new crop” MY 2013/14: 15.5% S/U & $4.30-$5.10 /bu

The USDA’s May 2013 WASDE report projection of U.S. corn supply-demand balances and prices are shown in Table 1 & Figure 6.  Based on projected total supplies of 14.942 bb and total use of 12.920 bb, ending stocks are forecast to be 2.004 bb with ending stocks-to-use of 15.5%.  The USDA projection that under these conditions for “new crop” MY 2013/14,U.S. corn prices will be in the range of $4.30-$5.10 per bushel.

Existence of Inflexible Supply-Price Conditions in the U.S. Corn Market

In terms of how U.S. corn prices are projected to respond to lower supplies and tighter supply-demand balances, in response to a 25.5% increase in projected U.S. corn total supplies in “new crop” MY 2013/14 compared to the previous year (from 11.894 bb in MY 2012/13 to 14.924 bb in MY 2013/14), the USDA lowered its projection of U.S. corn average prices by 31.9% (from $6.90 in “old crop” MY 2012/13 to $4.70 in for “new crop” MY 2013/14). 

These percentage changes in price relative to percentage changes in total supply equal a ratio of 1.25 (i.e., 31.9% ÷ 25.5%), i.e., for every 1% change in total supplies there is a 1.25% projected change in U.S. average corn prices in the opposite direction. Market situations in which percentage changes in grain supplies bring about larger proportional percentage changes in grain prices in the other direction (i.e., declines in supplies and increases in prices or vice verse), are indicative of inflexible supply-demand/market price conditions (sometimes referred to as “inelastic” market responses).

Conversely, for the previous marketing year, in response to a 12.0% decrease in projected U.S. corn total supplies in “old crop” MY 2012/13 compared to the previous year (from 13.516 bb in MY 2011/12 to 11.984 bb in MY 2012/13), the USDA raised its projection of U.S. corn average prices by 10.9% (from $6.22 in MY 2011/12 to $6.90 in “old crop” MY 2012/13).  These percentage changes in price relative to percentage changes in total supply equal a ratio of 0.91 (i.e., 10.9% ÷ 12.0%).

Figure 7 presents a perspective of the relationship between  U.S. corn ending stocks-to-use and U.S. corn average farm prices.  Since MY 2007/08 U.S. corn prices have generally responded to changes in U.S. corn ending stocks-to-use in a manner approximating an “inflexible demand relationship”.  Small changes in U.S. corn ending stocks-to-use have caused a relatively larger proportional change in U.S. corn prices in the opposite direction. 

Figure 7 also shows that U.S. corn % stocks-to-use has declined steadily over the last few U.S. corn marketing years until this year, falling from 13.1% S/U in MY 2009/10, to 8.6% S/U in MY 2010/11, to 7.9% in MY 2011/12, and to 6.8% in “old crop” MY 2012/13.  However, U.S. corn supply-demand balances are projected to increase markedly in “new crop” MY 2013/14 in response to a) a return to regular historic trendline yields, and b) less scarce U.S. corn supplies.  Corn prices in the U.S. have increased steadily over the last several years, climbing from $3.55 per bushel in MY 2009/10, to $5.18 in MY 2010/11, to $6.22 in MY 2011/12, to an estimated level of $6.90 in “old crop” MY 2012/13.  But now they are projected by the USDA to decline to the range of $4.30-$5.10 in “new crop” MY 2013/14.  

Figure 7. U.S. Corn Price vs % Stocks-to-Use (MY 1973/74 through Projected MY 2012/13)         
(May 10, 2013 USDA WASDE Report)

 

The USDA’s May 10^th WASDE report provided the initial projection of U.S. grain sorghum production and supply-demand balances for the “new crop” 2013/14 marketing year.  This initial USDA projection included higher planted and harvested acreage, a return to historic average yields, a sizable increase in projected 2013 production and total supplies coupled with increased usage in all major categories, higher ending stocks and % ending stocks-to-use, and markedly lower prices.  Minor changes were also made in “old crop” MY 2012/13 supply-demand balances (Table 2). 

Planted & Harvested Acres: The USDA National Agricultural Statistical Service (NASS) used the March 28^th USDA Prospective Planting report projection of U.S. grain sorghum planted area of 7.620 million acres (ma) in 2013 – up from 6.244 ma in 2012 (Table 2).  The USDA also projected that 2013 U.S. grain sorghum harvested area would be 6.580 ma – also up from 4.955 ma in 2012.  This would amount to a harvested-to-planted acreage ratio of 86.35% - the Olympic average (without the high and low values) for the 2007-2011 time period.  This 2007-2011 Olympic average compares to the 2000-2012 average of 82.74% and a median of 83.71% - ranging from a low of 71.68% in 2011 to a high of 89.06% in 2010.   

Yields: USDA projected 2013 U.S. grain sorghum yields of 64.4 bu/ac – based on “the average for 1990-2012 excluding years that are more than 1 standard deviation from the mean for the period” (Quote from May 10^th WASDE report) (Table 2).  If achieved, 64.4 bu/ac in 2013 would easily be within the range of U.S. grain sorghum yields achieved for the 2007-2012 period of 49.8-73.2 bu/ac.   

Production: The USDA used the March 28^th USDA Prospective Planting report projection of 7.620 million acres of grain sorghum to be planted in the U.S. in 2013, with 6.580 ma harvested, and a U.S. average yield of 64.4 bu/ac for a projection of 2013 U.S. grain sorghum production of 425 million bushels (mb) (Table 2).

Total Supplies: For “new crop” MY 2013/14, the USDA projected beginning stocks to be 22 mb, down 1 mb from 23 mb in “old crop” MY 2012/13, and from 27 mb in MY 2011/12.  With the USDA’s projection of 2013 U.S. production of 425 mb and 0 mb of imports, the USDA projected total U.S. grain sorghum supplies in “new crop” MY 2013/14 to be 447 mb.  This amount of total supplies would be up from 282 mb in “old crop” MY 2012/13, 242 mb in MY 2011/12, and 387 mb in MY 2010/11, but still down from 438 mb in MY 2009/10. 

KSU Projections of 2013 U.S. Grain Sorghum Planted & Harvested Acres, Yield and Production

Planted & Harvested Acres: The Kansas State University forecast of 2013 U.S. grain sorghum rely on March 28^th Prospective Plantings report projection of 2013 U.S. grain sorghum planted area of 7.620 million acres (Table 2).  The forecast of 2013 harvested acres depends on whether a “short crop” yield or a “trend line” or “high” yield occurs this year.   In the event of continuing drought in 2013 in the Western Plains and an unfolding “short crop yield” scenario, the proportion of harvested to planted acreage could well be nearly equal to 71.7% as occurred in the short crop year of 2011. However, in the event of “average yield” and “high yield” crop conditions such as occurred in 2007-2010, a more historically normal % harvested to planted ratio of 87.5% is used. 

Using these assumptions, the KSU projection for the U.S. “short yield scenario” for grain sorghum would net 5.464 ma harvested from 7.620 million planted acres, while the “average yield” and “high yield” crop scenarios would net 6.668 million acres harvested in 2013 (Table 2). 

Yield: For 2013, the KSU projected yield for the “short crop” scenario is 52.5 bu/ac, the midpoint of the range of 49.8-54.6 bu acre for the 2011-2012 crop years.  The “average crop” scenario yield is projected to be 64.0 bu/ac, while the “large crop” scenario yield is 72.0 bu/ac.  Yields for the “average yield” and “high yield” scenarios are based on the author’s judgment and U.S. grain sorghum yield history since 2007 (Table 2).

The likelihood of a drought-induced “short crop” in 2013 is put at 25%.  The likelihood of an “average yield” crop is put at 60% in the coming year.  Finally, the likelihood of an above “high yield” crop is put at 15% in the coming year.  The likelihood of drought is higher for grain sorghum than corn due to the geographic location of the majority of U.S. grain sorghum production – i.e., in the drought affected areas of Kansas and the Texas panhandle.  For the same reasons the likelihood of high yields in 2013 is at least marginally lower.  The likelihood of either “average” or “high” yields for the U.S. grain sorghum crop in 2013 is projected to be 75%.

Production: Using an estimate of 7.620 million acres of grain sorghum planted in the U.S. in 2013, with 6.668 ma harvested and an “average yield” projection of 64.0 bu/ac, the U.S. would produce 427 mb of grain sorghum in 2013.  Alternatively, if a “high yield” 2013 U.S. grain sorghum scenario of 72.0 bu/ac is achieved with 7.620 million planted acres, then 2013 U.S. grain sorghum production would equal 502 mb.  However, if another short crop yield of, 52.5 bu/ac is produced in the U.S. in 2013, then the coming year’s grain sorghum production would be projected at 287 mb (Table 2).

Total Supplies: Based on potential U.S. grain sorghum acreage, yield and production scenarios, probability weighted projections of “new crop” 2013/14 U.S. grain sorghum marketing year total supplies are provided in Table 2.  It is assumed here that a) U.S. grain sorghum beginning stocks for “new crop” MY 2013/14 equal projected ending stocks for “old crop” MY 2012/13 of 22 mb, and b) that little (i.e., 5 mb for the “Low Yield” scenario) or no “new crop” MY 2013/14 U.S. grain sorghum imports occur. 

These projections indicate that in 2013 there is 1) a 25% likelihood of a 287 mb grain sorghum crop “low yield / short crop scenario” with MY 2013/14 total supplies of 309 mb, 2) a 60% likelihood of a 427 mb grain sorghum crop “trend yield scenario” with MY 2013/14 total supplies of 427 mb, and 3) a 15% likelihood of a 480 mb grain sorghum crop “high yield scenario” with MY 2013/14 total supplies of 502 mb (Table 2).

Table 2. U.S. Grain Sorghum Supply-Demand Balance Sheet: MY 2007/08 – “New Crop” MY 2013/14
(May 10, 2013 USDA WASDE & KSU Projections)

Item	2007/08	2008/09	2009/10	2010/11	2011/12	2012/13	USDA May 2013 WASDE 2013/14	KSU Low Yield-Production 2013/14	KSU Trend Yield-Production 2013/14	KSU High Yield-Production 2013/14
% Probability of Occurring								25%	60%	15%
Planted Area (million acres)	7.7	8.3	6.6	5.4	5.5	6.2	7.6	7.6	7.6	7.6
Harvested Area (million acres)	6.8	7.3	5.5	4.8	3.9	5.0	6.6	5.5	6.7	6.7
% Harvested/Planted Area	88.1%	87.8%	83.2%	89.1%	71.7%	79.4%	86.6%	71.7%	87.5%	87.5%
Yield / harvested acre (bu/ac)	73.2	65.0	69.4	71.8	54.6	49.8	64.4	52.5	64.0	72.0
	million bushels
Beginning Stocks	32	53	55	41	27	23	22	22	22	22
Production	497	472	383	346	214	247	425	287	427	480
Imports	0	0	0	0	0	12	0	5	0	0
Total Supply	530	525	438	387	242	282	447	309	449	502
Food, Seed & Industrial	35	95	90	85	85	80	120	90	120	135
Exports	277	143	166	152	63	80	150	90	150	165
Feed & Residual	165	233	141	123	71	100	120	100	120	130
Total Use	477	471	396	359	219	260	390	280	390	430
Ending Stocks	53	55	41	27	23	22	57	29	59	72
% Ending Stocks-to-Use	11.1%	11.7%	10.4%	7.5%	10.5%	8.5%	14.6%	10.4%	15.1%	16.7%
U.S. Grain Sorghum Avg. Farm Price ($/bushel)	$4.08	$3.20	$3.22	$5.02	$5.99	$6.65-$7.05 ($6.85)	$3.90-$4.70 ($4.30)	$6.20-$7.20 ($6.70)	$3.30-$4.30 ($3.80)	$3.00-$4.00 ($3.40)