Ever since the U.S. Department of Agriculture crop enumerators scoured Corn Belt fields in late July and early August and projected a 169.5 bushel per acre national yield average, farmers have been rhetorically asking how they could be so wrong.
Then farmers finally began harvesting and their yield monitors quieted down the complaints, and they accepted a national average yield in the 170 bushel range.
Last Thursday, when the National Agricultural Statistics Service (NASS) released its November crop estimate containing verifiable yield information, the 2017 corn crop was pushed upward by nearly 6 bushels from the August estimate.
Farmers were again rhetorically asking how the USDA could be so wrong. NASS reset the goal post at 175.4 bushels per acre, shocking the corn market into a six-cent drop that day and a total deterioration of more than a dime since before the crop report.
This all happened unexpectedly, but at a time when many farmers were anticipating the corn market having to buy acres away from another larger soybean crop in 2018. Now, the soybean traders don’t have to fight for acres with corn, since there will be upward of two and a half billion bushels of corn without a home when the marketing year ends next August. That is nearly a six-month supply for either the ethanol or livestock feeding industries in the United States, and nearly twice the volume of corn that will be exported.
But where did this glut of corn come from and how long is it going to hang around like an unwanted in-law? While we may not get back to the glory days of $7 per bushel corn for many years, many farmers need $4 corn to ensure that production costs are met, the family is fed and the kids are off to college.
The glut of corn did not originate from any substantial increase in acreage or more fertilizer, but resulted from improvements in genetics that helped it to be particularly successful in the wake of a challenging growing season in 2017.
Nearly every cornfield at some time this year was beset with abnormally hot and cold temperatures and with wet and dry conditions at abnormal times. A 175 bushel per acre national yield average yield in 2017 is a testament to the efforts of corn breeders from nearly every seed company, not just the big-name few.
Looking at the weather data for 2017 and comparing it to moisture and temperature trends of the past 30 to 40 years, yields in Central Illinois should have been closer to 150 bushels per acre, not the 200 bushels which it may approach in many regions in the northern two-thirds of the state.
Think what yield might have occurred if we would have had perfect corn-growing weather this year. The national average may have been closer to 200 bushels per acre. And the Randy Dowdys, David Hulas and Jeff Browns of the nation would be taking home 600-plus bushel hardware from the National Corn Growers yield contest results.
Don’t expect farmers to ratchet back their efforts to grow corn. It’s a love thing. But to restore profitability to agriculture, and specifically corn production, the demand has to increase, not a decrease in supply. Economist Tanner Ehmke of CoBank, the Farm Credit System’s bank for cooperatives, says the corn glut is going to last at least three more years, and will diminish only with demand growth as the global middle class increases its wealth.
For corn, Ehmke says, “In the short term, demand for corn will continue on a solid growth path. However, the trajectory is expected to slow over the medium term as livestock and broiler growth slows. The ethanol sector will also struggle to grow demand substantively due to changing market dynamics in Brazil, and remaining challenges related to higher blend levels in the U.S. In the export market, corn will face significant competition from South America and Eastern Europe, specifically Brazil, Argentina and Ukraine. The combination of anemic demand growth domestically and rising export competition abroad is expected to result in only minor improvements in the years ahead.”
And he added, “Free trade agreements are needed to increase our competitiveness abroad.”
As corn is planted next year, few of those challenges will be resolved.