USDA Long-Term Ag Projections and La Niña Update - Tuesday, 20 February 2018

Update for February 20th, 2018

The USDA has published their long term agricultural projections for 2018 to 2027 for U.S. crops, I have included the highlights for corn and soybeans.

CORN

  • Total corn acres are expected to continue to decline.  During the period from 2012-2014 the U.S. planted an average of 257 million acres of the 8 major crops. Since then the average acres planted to corn, soybeans, wheat, upland cotton, sorghum, rice, barley, and oats has dropped off to an average of 253 million acres.  It is expected that that the average acres planted to these crops will remain somewhere between 252 and 255 million acres for the next decade.  Corn acres are predicted to lose the most acres between now and 2027 to an average of 87.5 million acres but improved hybrids and increasing yields the total amount of production is still expected to increase. 
  • The USDA has estimated the average yield in 2018/19 at 173.5 bushels per acre which is well behind this last season’s average of 175.4 bushels per acre.  The agency has also forecast their expected average yield for coming years and as we look 10 years out the predicted average yield increases to an average of 191.5 bushels per acre.
  • Ethanol production is expected to increase slowly for the next couple of years and then begin to gradually fall off to levels near those of 2016 within the next 10 years.  Reductions in fuel consumption due to more fuel efficient vehicles and better modes of urban mass transportation are expected to reduce overall usage.  It’s predicted that falling demand for ethanol and an increase in demand for corn for other sources will drop ethanol production from the high of 38% of total use to below 35%.
  • The U.S. is anticipated to remain the world’s largest exporter of corn for the duration of the outlook.  An increase in income especially in developing countries will increase the demand for quality meat which will raise the demand of corn for feed.  A slowly weakening U.S. Dollar is also expected to raise export potential.  In contrast though increasing competition from Brazil, Argentina and Ukraine along with our own growth of corn used for domestic feed is forecast to slowly reduce the U.S. market share of global corn trade to below 30% during the outlook period.
  • The USDA also projects that the average price for corn will range from $3.20 to $3.60 per bushel during the next 10 years.

 

SOYBEANS

  • Rising global demand and increasing domestic use are expected generate higher returns for producers which in return will prompt increases in soybean acres.  The USDA predicts that acres planted to soybeans will rise above corn acres and average around 91 to 92 million acres.
  • The yield outlook for 2018/19 was set at 48.4 bushels per acre which is lower than this past season average of 49.5 bushels per acre.  Yields for soybeans are forecast to increase to an average of 53.1 bushels per acre by 2027.
  • Solid demand especially from China is expected for the outlook period which will enhance U.S. trade.  Ultimately though increased competition from South America is likely to reduce the overall share the U.S. has in the global trade market.
  • Soybean meal will face stiff competition from South America.  While the U.S. is looking for a small increase in meal exports the global market share will drop from 16% to 14% by the end of the 10 year period.
  • Soybean oil used for the production of biodiesel is expected to increase to near 7.4 billion pounds by 2021/22.  Additional demand for biodiesel and renewable diesel is expected in order to meet the RFS advanced biodiesel fuel requirement.
  • The USDA projects the average soybean farm price to range between $9.30 and $9.80 per bushel throughout the next 10 years.

 

 

 

The state of Kansas just finished the driest period on record from November 2017-January 2018 according to NOAA.  The seasonal drought outlook does not see much relief for the southern Plains all of the way through the end of May.

 

 

 

The southern tier of the U.S. is experiencing dramatically expanding drought conditions this winter compliments of La Niña.  During this weather pattern, which is most prevalent during winter months in the northern hemisphere, the southern portion of the U.S. generally receives below-normal precipitation. Drought conditions have become increasingly worse since fall from southern California to the southern Plains and into the Southeast.  The drought in the southern Plains has become critical in parts of Texas and Oklahoma which have not seen any precipitation for four continuous months.  The drought monitors second worst drought rating covered 38% of Oklahoma, 13% of Texas and 9.5% of Kansas as of February 2018. La Niña remains in place but a wave of warm water is moving eastward below the surface which is a sign the system could be weakening.  Right now there is a 55% chance that the weather pattern will return to an ENSO or neutral status by the March-May time period.  The next official update for La Niña will be given on March 8th

 

The NOAA outlook for March is shown below. Winter is likely to prevail across the northern Plains and upper Midwest where conditions are predicted to be the furthest below normal. A slow moving Arctic cold front in the central part of the U.S. has basically dividend the country into summer temps in the south and extremely cold conditions in the Plains with a 100 degree temperature difference between the 80+ degree temps in Florida to the -20 degree readings in Wyoming. The extremely cold temps are forecast to make their way to the east and reach the eastern U.S by the end of the week.

 

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