Despite the growing season’s adverse weather, the 2006/2007 U.S. corn and soybean crops could be the second or third largest on record. Yields won’t be finalized until later this fall, but in most cases 2006 crop yields appear to be surprisingly strong given the hot, dry weather from May through July across the Western Corn Belt.

Early estimates pegged corn production at just below 11 billion bushels, but with favorable late-summer weather, upward revisions into fall could boost corn production by 100 million to 150 million bushels, and put the national average yield at 154 to 155 bushels an acre. That’s well above the long-term trend yield and much higher than the late-summer crop-condition ratings had implied.

USDA reported near-record ear counts this season, eclipsed only by 2004 when the national average corn yield hit the current record of 160.4 bushels per acre. Rising plant populations and ear counts are key factors contributing to higher yields over time.

Similarly, the soybean yield could range from 41 to 42 bushels, down only modestly from 2005’s record of 43.3 bushels. During a late summer crop tour, Doane Advisory Services’ analysts rated soybean stands for the Central and Eastern Corn Belt at the highest level recorded in more than 20 years of conducting the tour. However, heat and dryness in the far west, as well as throughout the Delta may hold yields below last season’s level.   

The favorable crop outcome can be attributed to improved technology, early planting and timely rainfall. While the west was too dry much of the summer, crops tolerated the heat and dryness fairly well. Early planting, as well as the late-July and August rains helped ease crop stress and maintain yield potential by aiding  grain fill.

In contrast, the Eastern Corn Belt was too wet early in the season. Wet conditions even delayed planting. The abundant moisture paid off, though, as summer progressed. Yields in the Eastern Corn Belt states of Indiana and Ohio could reach new record highs for both corn and soybean crops.

Much attention has been focused on burgeoning demand for corn led by corn-based ethanol production. Demand forecasts vary widely, but even conservative estimates suggest ending corn stocks will be drawn down sharply this season.

Tightening global supplies along with long-term forecasts for rising domestic demand indicate higher prices will be needed in order to attract additional corn plantings in 2007 and beyond.

Soybean supply/demand projections are more balanced, with soybean ending stocks holding steady or climbing from 2005/2006 levels. On the demand side, global soybean consumption continues to increase. Despite this, Brazilian acreage is expected to decline by 5 percent to 7 percent from a year ago. Lower U.S. plantings also are anticipated in 2007, as producers expand corn plantings at soybeans’ expense. Biodiesel production should gain momentum over the next year, further enhancing the long-term outlook for the soybean complex.

 Seasonal price weakness is expected with harvest this fall, but corn and soybean prices should rebound through winter and spring, as focus shifts from the supply side to growing demand and the southern hemisphere’s crop prospects.

Pork producers should take advantage of seasonal price weakness late this summer and early fall to lock in corn and soybean meal costs for a significant portion of feed requirements through year’s end. Corn’s cash basis levels are usually weak at harvest, which makes cash corn purchases an attractive alternative to long futures’ positions or call-option ownership as a feed hedge. Corn price gains will materialize through the fall and early winter to more than offset feed ownership costs. Prices could move up sharply through December if ethanol and imports compete aggressively for limited supplies.

Gains in soybean meal prices depend on the final soybean crop size, but soybean meal offers a good value in the $150-per-ton area basis nearby futures. Futures have found good support for the past 6.5 years around $145 to $150.

Editor’s note: Doane Advisory Services is a subsidiary of Vance Publishing, for more information, go to www.doane.com.