 Alternative 2011 Corn Production, Consumption, and Price Scenarios
is available in its entirety on the farmdoc website at
farmdoc.illinois.edu.
"We looked at the current situation in which we're expecting very
tight year-ending stocks and developed three supply, consumption and
price scenarios for the 2011-12 marketing year," Good said. "The
yield alternatives include a trend yield, an average yield resulting
from good weather and an average yield resulting from poor
weather. We followed those scenarios through a balance sheet and
into a price projection under each of those three scenarios, just to
underscore how important crop size is to next year's average price."
In one scenario, Good and Irwin calculated a trend yield based on
actual U.S. yields since 1960 at 158 bushels for 2011. This was
applied to an expected 92 million acres planted.
"This is a speculation based on where the market is centering on
its expectation about acreage response this year," Good said.
In the second scenario, they looked at the historic yields since
1960 and converting those yields into 2011 equivalents; that is,
they added the trend back into the actual yields and then calculated
the average yield for the 10 lowest-yielding years since 1960.
"That calculates to be 147 bushels per acre, in terms of 2011
technology," Good said.
"Then we looked at the 10 highest-yielding years and calculated
the average, which was 169 bushels in today's technology. With those
calculations, we asked: What if we have those three
alternative-yield scenarios? What does that imply for the balance
sheet and the price of corn next year?"
For the trend-yield scenario, the summary concludes that the
market would not be able to begin to rebuild inventories next year;
the year-ending stocks would remain at 675 million bushels; and corn
prices would average relatively high, near $5.75 per bushel.
This is compared with the expectation of $5.40 for the current year.
"Under the good-weather scenario, we would see a big crop of over
14 billion bushels." Good explained that this scenario would
suggest there would be room to expand consumption and build the
year-ending stocks to 8 or 9 percent of consumption.
"We believe that would result in a season's average price
slightly under $5 per bushel, with our projection at $4.75 as next
year's average price," he said.
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Under the poor-weather scenario, Irwin and Good see two outcomes.
"First, consumption would have to be restricted considerably,
primarily in the livestock sector," Good said. "The year-ending
stocks would be reduced to an absolute minimum level -- we think
about 5 percent of annual use, or about 625 million bushels."
Good said that with high livestock prices, average corn prices
would be very high during the 2011-12 marketing year -- about $7 for
the year, recognizing that at points during the year, prices could
be substantially higher.
He noted that trend yield can be calculated differently, using
different time periods.
"Most people use a shorter time period than we do and get a trend
yield that's maybe 3 bushels higher than the 158 that we use," Good
said. "Still, the three scenarios would unfold very similarly to
what we've outlined here."
"The most troublesome scenario for 2011 would be a short crop
that resulted in extremely high prices," Good added. "That is the
scenario that might require some policy adjustments that
policymakers should be thinking about now."
[Text from file received from
the University of Illinois
College of Agricultural, Consumer and Environmental Sciences]
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