My next recap is in regards to the "Crop Markets in Transition" presented by Darrel Good of the University of Illinois.
Darrel noted that there is the potential for a 14 billion bushel crop with added production in South America, it may be tough to meet the export estimates by USDA. Ethanol consumption should pick up by about 350 million bushels. Feed and residual is expected to jump by a large amount due to the large size of the crop (i.e. this is the plug number).
Ending stocks of corn can easily hit 2 billion bushels (again assuming weather cooperates). Since current future prices for new crop corn is under the spring price set for crop insurance, Darrel has recommended not making many new crop sales (assuming the farmer has crop insurance).
Regarding soybeans, Darrel noted that the final soybean numbers have a greater variability due to the late planting of the crop. If there is an early frost, then the crop may be near the 3 billion bushel level. If tread line yield is achieved, then the crop will most likely be nearer 3.4 billion or so.
It appears that the average soybean price going forward should trend between $9 and $13 for an $11 average. This will occur when the supply shock of the last couple of years wears off.
Chris Hurt of Purdue University then presented an outlook on the world supply and demand outlook. The world total acres of the major crops hit a new record of 2.288 billion acres. Over the last 7 years we have added 147 million acres into production. Ofthe increase about a third is in South America, the Former Soviet union add about 20%, East Asia and North America about 15%, withthe other increases spread over the world.
The trends for world stocks as a percent of use is as follows:
- Corn - 27.3% up from about 22% this year
- Beans - 16.2% up from 14.4% this year
- Wheat - 26.1% slightly lower than last year
- Rice - 22.6% up slightly from last year
This means that there should be no excessive supplies.
US net farm income was about $118 billion in 2011, $113 in 2012 and is expected to be $128 billion in 2013. Corn revenue inlcuding crop insurance payments were $66 billion in 2010, $80 billion in 2011 and a record $88 billionin 2012 even with the drought. Total revenue for 2013 are expected to drop by $15 billion even though the crop may be at least $2 billion larger.
Average quality Indiana farmland returns over the last five years were a low of $136/acre in 2009 and peaked in 2011 at $357. While lower in 2013, the expectation is per acre returns of $285 with a possible drop back to $210 in 2016.