As we progress into harvest, yield reports for the upper Midwest just keep getting worse and worse. The Mississippi Delta has some good yields and some other areas in the South have had above average yields, but for the most part, this is going to go down as the worst corn crop (relatively speaking) since 1988. This crop was saved only by genetic improvements. Without them, only God knows where this corn crop would have ended up.
As I write this, we are officially forecasting a national average yield of 136 bushels per acre. There are many estimates out there in the low 120s. The final yield will be somewhere in-between. My guess is we are too high and 120 is too low.
But at this point it is almost a moot issue. Anywhere in that range, demand is going to have to be rationed more than is currently taking place. Where is it going to come from?
Some think the ethanol industry. Frankly, I doubt it. Even if the ethanol mandate were to be lowered, the industry needs a very large quantity of ethanol to meet EPA requirements. Emission concerns in metropolitan areas will have to have ethanol whether it is mandated or not. It seems almost impossible to get corn usage for ethanol below 4.4 billion bushels per year, no matter what the regulations might be.
It’s also an election year and while some anticipate that this administration could possibly implement an executive order to lower the mandate, keep in mind that presidents are elected on an electoral college system — not popular vote. If our system was on popular vote, then there would be a higher degree of risk of such a move taking place.
Most likely, cut in demand is going to have to come from the livestock industry. My guess is that the industry getting hurt the most right now — that will result in even more herd liquidation — is the dairy industry. Most of the large hog operations, in my opinion, were in reasonably good shape going into this drought disaster. The poultry industry could suffer some, but I think most of the cutback will come from dairy.
Acreage will soar
One thing for sure is that planted acreage of corn both here and around the world will soar with the current price incentives that are being offered. A year from now corn could be under $4 per bushel if reasonable growing conditions occur. Supply can be changed quickly. Demand takes a long time to rebuild.
Seasonally, odds are high for a September top. Be ready.
Richard Brock is president of Brock Associates - [email protected]