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Poor Growing Conditions Affect Grain Supply and Demand

WASHINGTON, D.C., July 11, 2012 – Dry weather continued to influence the crop outlook in the World Agricultural Supply and Demand Estimates released today by the Agriculture Department, according to the American Farm Bureau Federation.

The WASDE report showed smaller projected yields from June estimates across the board for U.S. soybean and corn crops, despite increased planting acreage from last year. It also showed a decrease in projected ending stocks and feed use. According to AFBF economist Todd Davis, these trends will likely continue through the year.

“The reductions in the July report reflect the World Agricultural Outlook Board belief that the drought has greatly reduced the production potential for corn and soybeans,” said Davis.

Corn yield was estimated at 146 bushels per acre, reduced by 20 bushels per acre from the June projections. The 2012-13 corn production estimate was subsequently affected, dropping to 12.97 billion bushels, a 1.82 billion bushel decrease.

The projected decreases in corn production will also have consequences on feed use. Ethanol use is also projected down 100 million bushels from June and export demand in corn has been reduced 300 million bushels.

The average projected soybean yield fell by 3.4 bushels per acre from June to 40.5 in July. Despite an increase in projected plantings, the substantial yield reduction pulled down this month’s estimate of production by 155 million bushels from June to 3.05 billion bushels. This number is slightly lower than the 2011 crop.

“Expect a lot of volatility in the coming year,” said Davis. “As the crop size declines, USDA will make further cuts to projected use while prices climb to both curb demand and encourage production in 2013.”

The report projected increased corn prices of $1.30 per bushel from the June estimate to $5.90 per bushel for the 2012-13 marketing year.

According to Davis, tighter projected stocks are to blame for the increase in prices. The 2012-13 ending stocks for corn are projected to decline 698 million bushels from June’s estimate to 1.183 billion bushels in July’s report. Soybean ending stocks don’t look any better, down 10 million bushels from June estimates to a current projection of 130 million bushels.

A report due out in August will have the first survey-based measure of crop yield potential. USDA will conduct producer surveys and field analysis throughout the fall and will then have a better idea of the damage done to the 2012 corn and soybean crop, according to Davis.

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Contacts: Tracy Taylor Grondine
(202) 406-3642
tracyg@fb.org
Cyndie Sirekis
(202) 406-3649
cyndies@fb.org