Editor's Note: Iowa State University Extension farm management specialist Steve Johnson provides the following information. He is a regular contributor to the Farm Management Friday column.
According to the latest update from the National Weather Service, announced on April 9, there is an approximately 70% chance that the current El Niño weather event will continue through the Northern Hemisphere during summer 2015, and a greater than 60% chance it will last through autumn.
El Niño weather conditions occur when surface waters of the Pacific Ocean near the equator become warmer than usual. La Niña, the opposite of El Niño, occurs when the water is cooler. El Niño favors good growing conditions in the U.S. Corn Belt. The current El Niño has been slow in developing and the warmer waters aren't in their usual location. In early March, the National Weather Service announced that this El Niño, although weak, was in place. Now they say it's strong enough to last.
2015 U.S. corn yield forecast is for 170 bu. per acre
Looking at the past 130 years, El Niño events that last into the summer months in the Northern Hemisphere tend to favor U.S. crop yields, especially in the Corn Belt, notes Elwynn Taylor, Iowa State University Extension climatologist. According to Taylor, an El Niño event lasting into summer would boost the probability to 70% that the U.S. national corn yield would be above the 30-year trend line. For 2015, that trend line corn yield is 162.3 bushels per acre. Currently, as of late April, Taylor is predicting a U.S. final corn yield of 170 bushels per acre.
Taylor has been showing his "risk wheel" at farmer meetings (see the illustration accompanying this article). He collaborates with Bob Wisner, a retired ISU Extension grain marketing economist, and they put a corn price forecast on the yield probability.
The 70% probability of good yields in 2015 is reflected on the right-hand side of the risk wheel (green and yellow) with higher U.S. corn yields. The left-hand side (red and blue) is associated with lower U.S. corn yields. Combining Wisner's price forecast as of April 10, 2015, for December corn futures at harvest, that price will range from just under $3.50 to $4.15 per bushel with yields above trend line.
Looking at $3.85 December corn futures price at harvest
Should corn yields fall below the trend line, those futures prices would range from $4.85 to as high just over $9 per bushel. Assumptions made by Wisner include the estimate that U.S. farmers will plant 89.2 million acres of corn as was reported in the USDA Prospective Planting Report on March 31, 2015. Using Taylor's yield estimate of 170 bushels per acre for the national yield as of April 20, the average December corn futures price at the 2015 at harvesttime would be $3.85 per bushel.