Corn supply scenarios for 2011-12
show no cushion for drought
C
orn supply scenarios for 2011-12 are sobering, and there’s no
cushion for drought, with little to no corn available above pipeline
levels – the amount of corn needed to keep the marketing chain
of corn working.
What are the odds for a drought? According to meteorologist Dr.
Elwynn Taylor at Iowa State University, over the last 800 years the
longest time between major droughts in the Midwest was 23 years.
The last major agricultural drought in the U.S. Corn Belt was in 1988.
So, this year would tie the record.
Although the lack of a drought for an unusual number of years does
not mean that any particular year will experience one, it is probable
that a drought will happen sooner rather than later.
This year would be a particularly bad year to have a drought, due to
an extremely tight supply of corn predicted for the end of this crop year
on August 31. It is now apparent that on that date there will be little or
no extra corn above pipeline levels. What are the potential effects of a
drought on corn yields? How low could production go?
result is a graph that clearly shows the effects of droughts and ;oods – and years with perfect grow- ing conditions as well – on yield. If a drought like that of 1988 were to happen in this crop year, corn yield would drop to 125 bushels. A minor drought would drop yield to 150. A ;ood like that of 1993 would reduce yield to 135 bushels. On the other hand, perfect weather would
bring yields up to 172. Based on the graph in the
paper, all the yield numbers between 125 and 172 should be included
in any scenario-building exercise. Taking the March 31 planting inten-
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Calculating the effects of droughts, floods
To understand the potential effects of a drought on U.S. corn pro-
duction, a good source of information is a paper written by Drs. Good
and Irwin of the University of Illinois and published as a Marketing
and Outlook Brief on March 2. That paper contains a graph on corn
yield that is different from most yield-trend graphs. The graph de-trends
corn yields and puts 2011 technology into every year since 1960. The
tions report number of 92.2 million acres planted to corn, the scenarios
shown in the table, “Corn supply scenarios for 2011-12,” paint a sobering
picture for corn supply and demand.
Sobering corn supply scenarios
In the current crop year (2010-11), the ending inventory of corn
will be at pipeline levels. As a result, the total use of corn in crop year
2011-12 can be no greater than harvest (without imports).
In the best-case scenario, a yield of 172 bushels, the price of corn
might drop to an average of $5.50 per bushel as higher production
allows for increased use, exports and ending inventory. Trend yield
of 159 bushels (considered the most likely) will lead to a harvest no
greater than the total use of corn this year, and the average price
would end up even higher than this crop year.
In the worst-case scenario, a serious disruption in the amount
of grain available will send prices soaring. The price of corn would
have to rise to the level where the federal government relaxes
the mandatory use of corn for ethanol. In addition, a signi;cant
early slaughter of animals would take place, and exports would
be severely restricted. Thankfully, this last scenario, although
possible, is unlikely. ■
2005 2010 Corn supply scenarios for 2011-12 – Billions of bushels 2010- 2011 2011-2012 Best case 2011-2012 Trend yield 2011-2012 Worst case 12. 5 14. 6 13. 5 10. 6 5.0 5. 4 5. 2 4. 4 5. 2 5. 3 5. 1 4. 4 2.0 2. 1 1. 9 0.5 13. 5 14. 1 13. 5 10. 6 0.7 1. 2 0.7 0.7 $6.00 $5.50 $7.00 $12.00
Harvest
Ethanol
Feed
Exports
Total use
End inventory
Chicago price
Tight supplies ahead: All the corn yield scenarios between 125 and 172 bushels
per acre are included in the chart.
Paul Aho, Ph.D., Poultry Perspective, phone 860.429.3053 or
email paulaho@paulaho.com
