Glauber Expects Return to Normal Yields in 2013-14

USDA Chief Economist Joseph Glauber gave attendees at the USDA Ag Outlook Forum "Managing Risk in the 21^st Century" a broad overview of what USDA expects for 2013 in terms of farm income, exports, yields and production and ethanol and he will leave the details to those speaking on Friday.

Glauber began by taking a look back at the 2012 growing season, which despite a historic drought, resulted in record farm income and strong exports. He did mention however, that there were sharp differences between sectors as the uninsured farmer was certainly hit by crop losses and the livestock and poultry industry struggled with high feed prices.

Looking forward, Glauber said USDA expects a rebound in yields, record corn and soybean production and lower prices. This should result in improved profitability for the livestock and poultry industries.

Taking a look at exports, Glauber sees agriculture exports in 2013 declining from 2012’s record high of $142 billion to $112.5 billion. China is expected to remain the top destination for U.S. exports for the second year in a row, with soybeans and cotton dominating the total.

The value of ag exports are expected to rise in 2013, while volumes are expected to decline. Corn is a notable exception in terms of value, as they are expected to decline 37.5% in 2013 from the year prior.

Another notable change on the ag export front is that Brazil corn exports in 2013 are projected to surpass U.S. corn exports, due to a record-large Brazilian bean crop, a poor U.S. corn crop as well as an increase in corn use for ethanol.

Also due to the poor 2012-13 U.S. corn crop, global ending stocks for 2012-13 are projected at just 50 days of use, which is the lowest level since 1973-74. This compares to carryover of 54 days of use in 2011-12.

Global soybean ending stocks are expected to rise by 4 days of use from 2011-12 to 84 days of use. 

Glauber also briefly touched on USDA planting projections for 2013. He expects planted corn acreage of 96.5 million, which compares to 97.2 million acres last year. Soybean acreage is expected to rise to 77.5 million from 77.2 million in 2012-13. Wheat is also expected to pick up acres in 2013, rising from 55.7 million to 56.0 million acres for 2013. Cotton acres are seen at 9.8 million, down sharply from 12.1 million in 2012.

While significant drought remains embedded in the Central Plains and much of the Corn Belt still sees some drought, there has been improvement in the last six months, according to Glauber. While he says this has major implications for the HRW crop, he still expects a return to normal yields and thus a rebound in production for the corn and bean crop. Following are his production projections:

·         Corn production: 14.530 billion bushels

·         Soybeans:  3.405 billion bushels

·         Wheat:  2.100 billion bushels

·         Cotton:  14.00 million bales

Glauber explained that there is little correlation between rainfall one year and rainfall the next. Thus, he says there is no reason to think we are heading for another poor crop. Further, Glauber said that empirical data indicates there is low correlation between pre-season low subsoil moisture and yield reasons. For that reason, he says there is no reason to think we will not be looking at normal yields in 2013.

This is expected to result in lower average crop prices in 2013-14 of:

Corn: $4.80, down from $7.20 in 2012-13.

Soybean:  $10.50, down from $14.30 in 2012-13.

Wheat:  $7.00, down from $7.90 in 2012-13.

Glauber also spent some time on ethanol as it is a major driver in the corn market.  He projects U.S. corn use for ethanol to rebound in 2013-14 but to remain below 5 billion bushels. This is due in part to a decline in gasoline consumption in recent years due to high prices, improved energy efficiency and the recent recession.

Livestock prices are expected to rise in 2013, with cattle prices expected to average $129.50, up from $122.86 in 2012, and hog prices are expected to increase to $63.00, up $60.88 2012.

These higher livestock prices are expected to translate to higher food prices in 2013, though the Consumer Price Index is expected to remain below 2008 and 2011 levels.