Farmers in Iowa and other parts of the Midwest are expected to harvest more corn and soybeans this year than previously anticipated, according to USDA's monthly estimate for August. Released last week, the August crop production report says the 2015 U.S. corn crop could be the third-largest on record. The soybean crop could be the second largest, if current estimates are realized.
USDA is forecasting a U.S. harvest of 13.69 billion bushels of corn this year, an increase of 156 million bushels from the government's July projection. The expected soybean production was increased by 31 million bushels to 3.92 billion, second only in size to last year's record U.S. crop.
Both the corn and soybean production estimates surprised analysts who were expecting USDA to ratchet down its forecasts to reflect heavy rains that prevented plantings in some areas of the eastern Corn Belt and curtailed yields in others.
Big crops, lower prices hurting profitability
The big crops and lower prices could potentially hurt some cash-strapped farmers already struggling with low commodity prices. There was some big profitability in agriculture in recent years, and now it's going to be more of a belt-tightening and cost cutting situation for farmers, says Chad Hart, an Iowa State University Extension grain marketing economist.
If corn and soybean prices stay at these low levels, everyone is going to have to be more cautious about what they spend and what their input costs are, he says. Farmers who haven't overextended themselves are more likely to do okay and survive financially, but others who were too aggressive in renting land or buying land and new machinery could see a bigger hit. Depressed commodity prices are already pressuring more farmers to negotiate lower cash rental rates for 2016.
Hart provides the following summary of the latest USDA reports.
Grain supplies are on the rise, prices decline
In preparation for the release of the August USDA crop reports, the see-saw of uncertainty about crop production and yields went through another up-and-down cycle. The release of the reports on August 12 accelerated the down cycle.
The trade had anticipated smaller crop estimates from USDA, with the average estimates weighing in with yields of 164.5 bushels per acre for corn and 44.7 bushels per acre for soybeans. However, USDA reported yield estimates of 168.8 bushels per acre for corn and 46.9 bushels per acre for soybeans.
Even with a slight downshift in soybean plantings, corn and soybean production estimates increased and now put the 2015 crop year on pace to be a very strong production year despite all of the weather issues. And while there was some positive news on the demand front with feed and ethanol demand increasing, grain stocks are on the rise and price estimates have retreated.
Could see lowest U.S. net farm income since 2009
USDA's season-average price estimates for the 2015-2016 crop marketing year dropped by 10 cents for both corn and soybeans. They now stand at $3.65 per bushel for corn and $9.15 per bushel for soybeans, based on the latest government forecast.
Earlier this year USDA projected net farm income would drop 32% to $73.6 billion, in 2015. This would be the lowest U.S. farm income since 2009 and down almost 43% from the record high $129 billion just two years ago.
Iowa is forecast to harvest a record corn crop this fall
Iowa, the nation's top corn producer, is forecast to harvest a record 2.43 billion bushel corn crop this fall, according to USDA's August estimate. If realized, this year's production would be the highest on record for Iowa, about 1% above the previous high in 2009.
Based on conditions as of early August, Iowa is expected to harvest an average corn yield of 183 bushels per acre in 2015, and increase of 5 bushels per acre from last year. If realized, the yield would be the state's highest on record, 2 bushels above the previous high set in 2009. Corn planted and harvested for grain acreage this year is estimated at 13.7 million and 13.3 million acres, respectively.
Forecasted production and yield is up in five of Iowa's nine crop reporting districts. Northwest Iowa is anticipated to have the highest yield in the state, with 193 bushels per acre. All three northern Iowa districts are anticipated to have higher yields and production than last year, while all three southern districts are expected to have lower yields and production than last year.
Soybean harvest is estimated to be Iowa's second largest
Soybean production is forecast by USDA at 516 million bushels for Iowa in 2015. If realized, this would be the second highest soybean production on record for the state, behind only the 525 million bushels produced in 2005. Based on early August conditions the yield forecast is 52 bushels per acre, a half-bushel above the 2014 statewide average. Iowa farmers planted 10 million acres of soybeans and plan to harvest 9.92 million acres this year.
Soybean production and yield is forecast to be up in four of Iowa's nine crop reporting districts. Northwest Iowa is expected to have the highest yield in the state, with 57 bushels per acre. Similar to corn, all three northern Iowa districts are anticipated to have higher yields and production than last year, while all three southern districts are expected to have lower yields and production. The largest increase in soybean yield is expected in the north-central Iowa, where yields are anticipated to average 8.4 bushels per acre more than 2014. The largest decrease in yield is expected in southwest Iowa, where yields are expected to decline 6.7 bushels per acre from 2014.
All crop forecasts in USDA's August report are based on conditions on August 1 and do not reflect weather effects since that time. The next district corn and soybean production forecasts, based on conditions as of September 1, will be released on September 11.