Corn outlook reflects large 2004 crop

Corn growers found themselves in a familiar situation with the 2004 crop — excellent yields, plenty of corn and lower market prices. This marks the fifth year in the last seven when season-average prices are likely to be below the $2 level, says University of Georgia Extension Economist George Shumaker.

Shumaker presented his outlook for corn and soybeans in the recently released 2005 Georgia Farm Outlook and Planning Guide.

U.S. corn growers planted 81 million acres in 2004, the largest since 1985. They harvested 73.3 million acres, also the largest since 1985.

“Mother Nature provided almost ideal growing conditions for most corn growers this past year, and the crop responded in an astounding manner to yield 160.2 bushels per acre — a full 20 bushels more than the record set in 2003,” says Shumaker.

The work of plant breeders came to fruition this past year, he says with a record 11.74 billion-bushel crop and total supplies of 12.7 billion bushels, also a record.

“On the consumption side, we're also likely to see record offtake in both domestic feed use and food, seed and industrial uses, mainly on the back of a large increase in ethanol production,” says Shumaker.

A rebounding livestock herd, plus lower prices, will stimulate buyers to feed 6.075 billion bushels, he adds.

“Food, seed and industrial use will be near 2.795 billion bushels, with ethanol production accounting for nearly one in eight harvested acres. Exports will be strong at about 2 billion bushels — the first time since 1985 exports will be near that level. Total offtake will be about 10.87 billion bushels,” he says.

Ending stocks will nearly double to 1.85 billion bushels, the largest since 1999, and representing 17 percent of use, says Shumaker. Season-average national prices will be near $1.90 with Southeastern and Georgia prices closer to $2.25 per bushel, he says.

The outlook for 2005 is a little better, he says, assuming a reduction in acreage and yields that are closer to trend levels. “If harvested acreage is near 71.2 million acres, yields are near 141.5 bushels per acre, and offtake remains constant, we could see stocks falling to near 1 billion bushels or about 10 percent of use. Such a stocks level would project a season-average national price near the $2.40 level.”

Soybean growers increased acreage in 2004 for the first time since 2000, planting 75.1 million acres, the largest ever, says Shumaker. “It appears the high prices from the 2003 crop stimulated the rise to record soybean acreage. Yields during 2004 were up sharply over the drought-reduced yields of 2003. Generally excellent growing conditions across the country appear to be the main reason for the excellent yields, along with improved yielding varieties.”

Soybean production in 2004 totaled a record 3.15 billion bushels, up from 2.45 billion bushels produced in 2003, says Shumaker. Carry-in stocks were a record low at 112 million bushels. Total supply of soybeans was 3.27 billion bushels, up from 2.64 billion bushels for the 2003 marketing year.

Off-take is expected to rebound from the 2003 marketing year, he says. “The 2004 off-take will be close to 2.8 billion bushels and probably the second largest use level on record. There continues to be strong global demand for protein around the world, and that has provided a firm floor under the market.”

The demand for vegetable oil also is very strong, he says, and is adding significantly to the demand for raw beans by the crushers. Domestic crush will expand to 1.65 billion bushels, exceeding the average for the last four years due to demand from an expansion in grain-consuming animal units in the United States and strong oil demand, he adds.

Expectations are for acreage increases of 4 to 6 percent in the coming year despite continuing financial woes, says Shumaker. “If that crop is seeded without problems, weather remains favorable, and Asian Rust doesn't significantly reduce yields, we can expect a large Southern Hemisphere crop next spring.”

Despite a strong demand, ending stocks will rise to a projected 460 million bushels, the largest level since 1985, he says. The stocks-to-use ratio of 16.4 percent also reflects the large stocks situation.

“U.S. season-average prices are projected to average near $4.95 per bushel — well below the $7.34 for the 2003 crop. Market makers will keep a weather eye toward South American crop conditions and take price direction from events down there. Georgia growers should keep a close eye on the markets and be ready to move out with their soybeans held in storage on any rallies. Price could well be lower this spring than during the winter months.”

Early 2005 crop projections point toward a reduction in U.S. soybean acreage this year, says Shumaker. “If planted acreage is near 73.6 million acres and yields near the five-year trend of 38.4 bushels per acre, the crop would be about 2.7 billion bushels. Total supplies would be near 2.95 billion bushels.

“Unless demand grows sharply above the projected level for the 2004 crop, even the reduced acreage will produce almost enough soybeans to meet demand for 2005. Early projections for the 2005 crop are for prices to average about $5.15 per bushel unless either demand surges or production is sharply reduced.”

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