Enough corn? USDA says “abundantly so”, forecasting record 2012 harvest

May 11, 2012 |

If you have been reading newspapers and online sites over the past four years, you may have formed the impression that the use of corn for ethanol production has triggered food riots in Mexico, caused untold suffering for US meat producers, and in general caused global mayhem by turning food into fuel.

And you may have formed the impression that rampant demand for corn will cause deforestation of the Amazon, and possibly responsible for deforestation of the planet Mars

(What? Rainforests on Mars? Well, actually that comes strictly from the fictional motion picture Mission to Mars, but you get the idea).

A minority of voices has kept to a steady message that US farmers are up to the task, that rising corn yields and skill at using existing marginal land ensure that there is food and fuel for all, and that corn prices are a function of oil prices.

Who’s right?

The first World Agricultural Supply and Demand Estimates for 2012, from the US Department of Agriculture, give us an opportunity to review that debate.

Let’s go back 10 years ago, before the first Renewable Fuel Standard was passed, when there was 1.1 billion bushels of corn used for ethanol. Then, we’ll look at 2007-08, five years atom, when RFS had been implemented and RFS2 was on the way. And, we’ll look at the WASDE forecasts now available for the 2012/13 season.

The RFA’s Geoff Cooper reports, “USDA released its first estimate of the 2012/2013 corn crop size and it is a big one.  According to this estimate, USDA is projecting record US corn production of 14.79 billion bushels – up 1.7 billion bushels from the previous record of 13.09 billion bushels in 2009. USDA is also projecting corn for ethanol use to be 5 billion bushels for the marketing year running from September 1, 2012 to August 31, 2013. ”

Available corn

This chart pretty much sums up the state of play. Based on USDA’s forecast, the corn available for other uses, such as export and the feed markets (which is how field corn plays into the food market, as field corn is not used for human consumption) will have increased 31 percent during the corn ethanol era.

Let’s put this in terms of corn available for other uses, per US resident. In 2002 the population stood at 287 million, and there was 30.4 bushels of corn – that’s 1706 pounds – available per US resident for all other purposes besides corn ethanol.

Where is that today, after a decade of negative press on food vs fuel? The 2012 population stands at 313, and there are expected to be 36.6 bushels of corn – that 2050 pounds, available per US resident for all other purposes besides corn ethanol.

So, the average US resident has 344 more pounds of shelled corn this year, than in 2002. And the USDA is projecting a per-bushel price of $4.25 to $5 per bushel, down sharply from 2010-12 highs.

The RFA’s Take

“The 2012 projected yield of 166 bushels per acre would be a record yield, beating out the 2009 average yield of 164.7 bushels per acre; and be 35% higher than the average yield from the 1990s and 12% higher than the average yield since 2000.

“While still just an estimate, the confidence USDA is displaying in American farmers underscores their unique ability to feed the world and help renewably fuel the nation.  There is a lot of growing season left, and these numbers could change by the fall.  But, with normal growing conditions it is clear that farmers will continue to meet the bell and provide safe, reliable food and clean, domestic fuel and silence those chicken littles that perpetually predict a shortage of corn and catastrophe in the grocery aisle.”

A cautionary note from Piper Jaffray’s Mike Ritzenthaler

“Over the past decade the closest we have come to that level of corn yield occurred in the ’09/’10 season, when corn yields were 164.7 bu/acre. Importantly this was on 86.4 million acres. This year, U.S. farmers are expected to plant 95.9 million acres.

“Over the past five years, there has been a negative correlation between yield and corn acreage of -0.7 – which would seem to confirm intuition that higher acreage totals tend to bring in marginal yielding land (for example, of the 4 million acre increase this year, approximately 30% is coming from North Dakota – a low yielding state historically).

“While weather is clearly the key unknown variable at this point (and has been quite accommodating so far), we believe a yield in the 150-155bu/acre range is more reasonable given the planted acreage  figure, including the inclusion of higher acreage in low-yielding states and the likely increase in continuous (non-rotational corn).”

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