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January 23, 2013

Spring Weather Could Impact 2013 U.S. Crop Acreage

Even though much of the Midwest is in the grip of the coldest temperatures of the winter, early corn planting will commence within 30 days in the far southern locations and within 90 days in the southern Midwest. Therefore, let's take an early look at the potential for the 2013 crops in the U.S. and the factors that could impact the crops.

Ongoing Drought in Western Midwest - There has been some improvement in the drought situation in the eastern Corn Belt, the southern Corn Belt, and across the Delta, but the situation has not improved in the western Corn Belt from the Dakotas southward to Texas. With early corn planting scheduled to start within 90 days, it is highly unlikely that the subsoil moisture will be recharged before planting begins. Therefore, it is likely that the soil moisture reserves will be inadequate at the start of the growing season.

In the western Corn Belt, the state of Nebraska appears to be ground zero for the shortage of soil moisture. Nebraska is generally the third leading corn producing state in the U.S. trailing only Iowa and Illinois. The vast majority of corn production in Nebraska is irrigated and farmers are concerned if there will be enough water to adequately irrigate their corn especially if we have another dry summer. Restrictions were put in place last summer on the amount of surface water that was allowed for irrigation. There has not been any improvement in the water supply since last summer and it is entirely possible that new restrictions could be put in place even earlier this coming growing season.

It is important to note that the driest areas are currently in the western Corn Belt. The western Corn Belt is generally hotter and dryer than the eastern Corn Belt, so continued dryness in the western states could be a critical factor in the 2013 corn production. Corn requires much more water than soybeans and if it stays dry in the western Corn Belt, some farmers could opt to reduce their corn acreage in favor of more soybeans or grain sorghum.

2013 U.S. Corn Crop - 98.5 Million Acres and 153 bu/ac Yield - At this point, I would estimate the 2013 U.S. corn acreage at 98.5 million acres (97.1 million acres of corn were planted in 2012) with a nationwide corn yield of 153 bu/ac. The two big questions concerning the 2013 U.S. corn crop are: what factors could impact the corn acreage and secondly, what trend line corn yield should be used to start off the 2013 growing season.

While it is anticipated that U.S. corn acreage will increase in 2013, any acreage estimates this early in the year are tentative at best. At this point, the current market price and the crop insurance program would favor additional corn acreage in 2013. The USDA recently announced that there was a record payout for crop insurance claims in 2012 and the crop insurance program really helped the farmers avoid a disaster in 2012. There should be even more interest in the crop insurance program in 2013, which could give the farmers enough confidence to plant more corn in spite of unfavorable weather conditions (continued dryness).

On the other hand, continued dryness could influence farmer's decisions on acreage especially for those farmers who have seen a significant reduction in yields for corn-on-corn. Many farmers who plant corn-on-corn have been disappointed with their corn yields for three consecutive years in a row and if it remains dry until planting time, they may decide it's time to put more soybeans into their crop rotations.

The first corn is usually planted in south Texas by the end of February and in the Delta starting in March. Cotton acreage is expected to be down significantly in 2013 and many of those cotton acres should be switched to additional corn production. The corn that will be harvested in the Delta could be important to bridging the gap between old crop and new crop corn.

The other big question is what should be considered the trend line corn yield going into the 2013 growing season. A year ago, we were coming off of two disappointing corn years in a row, but we had not yet descended into what turned out to be the worst drought in 50 years. The general consensus at that time was that the trend line corn yield was in the low 160s bu/ac. The USDA had one of the highest trend line corn yields at 164 bu/ac, but they arrived at that number by dropping off the low yields of the previous year (2011).

We have now have had three disappointing corn yields in a row and we are still in the grip of a very significant drought, therefore I think we need to be cautious in our approach to the potential 2013 U.S. corn yield. I am going to start off the growing season with a U.S. corn yield of 153 bu/ac, but that number could easily change as we get into the heart of the growing season. If we had a perfect growing season, I think the corn genetics are now good enough so that we could see a U.S. corn yield of 175 bu/ac. On the other hand, 2013 is starting off much dryer than 2012 and we saw what happened to U.S. corn yields in 2012 (123.4 bu/ac)!

2013 U.S. Soybean Crop - 78.7 Million Acres and 43 bu/ac Yield - The 2013 U.S. soybean acreage is estimated at 78.7 million acres (77.2 million acres were planted in 2012) with a nationwide soybean yield of 43 bushels per acre. Soybean acreage should increase due to reduced cotton acreage and the possibility that some farmers in the dryer areas of the western Corn Belt may opt for less corn and more soybeans. Additionally, farmers may want to reduce their corn-on-corn acreage by returning more soybeans into their rotations. As with corn, I think the 2013 U.S. soybean acreage intensions could fluctuate significantly before the planting is complete.

The U.S. soybean yields have also been disappointing the last two years, but the 2012 U.S. soybean crop illustrated once again the resiliency of soybeans. The 2012 nationwide soybean yield ended up at 39.6 bu/ac, and while this is a disappointing yield, it is much better than anyone had expected given the dire conditions the crop endured during June and July.

Soybeans require much less water than corn and crop can survive quite nicely if the limited rainfall comes in well-timed increments. Therefore, even if the 2013 growing season starts off dryer than normal, it's not a sure thing that it will result in significantly lower soybean yields. As a result, I think we should assume a somewhat normal soybean yield in 2013 of 43 bu/ac. For soybeans, it's never certain what the crop will yield until it is harvested.