The U.S. corn crop could be far larger than the record harvest projected by the government, according to analysts whose estimates range as high as 15.1 billion bushels, based on continued good weather in the Midwest. The prospect of a mammoth crop is driving corn prices well below the cost of production, said Iowa Sen. Charles Grassley.
“It’s just not a very good situation, the way it looks now,” Grassley told reporters. Grain merchants in northeast Iowa are offering $2.90 a bushel for corn, he said. “If the price is this low … next spring, we’re going to find big concern.”
Farmers in the central Midwest are looking at the fourth straight year of decline in gross revenue per acre for corn and the third straight year of decline for soybeans, said economist Gary Schnitkey of U-Illinois. Production costs must be paid before farmers see their net income. “It seems reasonable to expect another low-income year in 2016,” Schnitkey wrote at farmdoc Daily. “Continued low revenues should be expected for 2017, meaning that cost-cutting must continue.”
The USDA will issue its first forecast of the crop on Aug. 12, along with estimates of the season-average price. In early July, the USDA projected a record crop of 14.5 billion bushels that would fetch an average of $3.40 a bushel at the farm gate, the lowest price in a decade. On Tuesday, corn for December delivery sold for as low as $3.29 a bushel at the Chicago Board of Trade, but recovered to close at $3.34, said Agrimoney.
U.S. farmers planted 94.1 million acres of corn this spring, the third-largest total since World War II. Thanks to a beneficial growing season, yields might break the record of 171 bushels an acre, set in 2014.
At the top end of forecasts, commodity brokerage INTL FCStone projects a corn yield of 175 bushels an acre and a crop of 15.1 billion bushels. Private consultant Michael Cordonnier pegs yields at 169 bushels an acre for production of 14.6 billion bushels. AgResource and Commodity Marketing Co. see a crop of 14.7 billion bushels.
A tidal wave of corn would swamp food processors, livestock feeders, ethanol makers and exporters, pushing so-called carry-over stocks — the grain in storage when the 2017 crop is mature — to the highest level in 12 years, the USDA said in July. If the crop is as large as analysts predict, corn stocks would be even larger.
Potentially offsetting a bumper U.S. crop, said Agrimoney, is the tightening corn supply in Brazil, a U.S. competitor in the world market. The Brazilian Agriculture Ministry said it would adjust its regulations to allow the import of genetically engineered U.S. corn for use as livestock feed. Dry weather in central Brazil and a rare freeze in June in the state of Parana, on the southeastern coast, has cut into “second crop” corn that is being harvested now.