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The Agricultural Newsletter
from the Federal Reserve Bank of Chicago
Number 1892

September 1997

AgLetter
RECORD SOYBEAN HARVEST EXPECTED
Two reports released by the U.S. Department of Agriculture
(USDA) in September—Crop Production and the World
Agricultural Supply and Demand Estimates—provided a
summary of expected grain and oilseed production and
use in the U.S. as well as the rest of the world. The reports
suggest that U.S. soybean production will reach a new
high this fall, while the corn harvest is expected to be
about the same as last year. While national production
forecasts for corn and soybeans showed little change
from the prior month, projections were trimmed somewhat
for Seventh Federal Reserve District states.
Nationally, corn production is projected at 9.27 billion
bushels, only marginally less than last year. If achieved,
it would mark the fourth time (all in this decade) that
U.S. farmers produced a crop in excess of 9 billion bushels.
In general, the steady production level is the product of
a small year-over-year increase in the number of acres
harvested and a modest decline in average yields. The
number of acres to be harvested is projected at 74 million
and is the most since 1985. The national average corn
yield is expected to be near 125 bushels per acre, about
2 bushels less than last year. Anecdotal reports indicate,
however, that corn (and soybean) yields may be more
variable than usual across local geographic areas.
In comparison, the soybean harvest is expected to
reach a record level this year, thanks to a combination of
relatively high yields and the large number of acres to be
harvested. The most recent production estimate of 2.75
billion bushels is 15 percent larger than last year and
nearly a tenth greater than the previous high set in 1994.
The number of acres harvested is expected to be up by a
tenth from last year and is the second largest on record.
Furthermore, the average projected yield of 39 bushels
per acre—if obtained—is 5 percent larger than last year
and is exceeded only by the 41 bushels per acre achieved
in 1994. Finally, it should be noted that the corn and soybean harvests are just getting underway in the Midwest,
and the yield/production forecasts could move either
way as the harvest progresses.

At 2.51 billion bushels, the summer wheat harvest
was up a tenth from last year and the largest since 1990.
The year-over-year rise in production was spurred by a
marginal increase in the number of acres harvested and
a large gain in the average yield. The national average
yield was estimated to be 39.5 bushels per acre, about
a tenth larger than last year and tying the record set in
1990. Winter wheat production—up more than a fourth
from the prior year—accounted for all the increase, offsetting a rather sharp decline in spring wheat production.
Mirroring the national trend, this fall’s corn harvest
in Seventh District states is expected to be similar to last
year, with little adjustment in either acres harvested or
average yield. But the anticipated year-over-year change
among the individual District states is something of a
mixed bag. Production levels in Illinois and Iowa are
expected to drop 5 percent and 3 percent, respectively,
from last year, while the other three states experience

Corn and soybean production estimates
Yield
1996

Production
1997*

(bushels per acre)

Corn
Illinois
Indiana
Iowa
Michigan
Wisconsin

1995

1996

1997*

( - - - - million bushels- - - -)

136
123
138
94
111

127
122
140
110
126

1,130
599
1,402
250
348

1,469
670
1,718
216
333

1,397
714
1,673
253
391

District states

129.6

129.4

3,729

4,406

4,428

United States

127.1

125.2

7,374

9,293

9,268

40
38
44
28
37

43
42
49
40
44

378
197
407
60
34

399
204
416
47
32

428
225
510
76
42

Soybeans
Illinois
Indiana
Iowa
Michigan
Wisconsin
District states

40.4

44.8

1,076

1,098

1,281

United States

37.6

39.3

2,177

2,382

2,746

*USDA projection as of September 12.
Source: U.S. Department of Agriculture.

gains ranging from 6 percent in Indiana to 17 percent in
both Michigan and Wisconsin. Since District corn (and
soybean) production is dominated by Illinois and Iowa,
the decline in those two states essentially offsets the
gains in the other states. Interestingly, the large yearover-year production gains in Michigan and Wisconsin
have differing explanations. Wisconsin crop farmers
expect to see above-average yields this fall, while farmers
in Michigan look for a return to a more normal situation
after last year’s disappointing yields.
In contrast to corn, District soybean production
is projected to register a sharp year-over-year gain of
17 percent to reach record high. Annual increases are
expected in all District states and range from 7 percent
in Illinois to over 60 percent in Michigan. At this point,
all District states except Illinois will likely bring in a
record soybean harvest. In general, the gains are fueled
by increases in both yields and harvested acres. Furthermore, all District states except Indiana are expected to
combine a record number of soybean acres.
With corn production expected to be steady when
compared to last year, the year-over-year change in total
supplies for the 1997/98 marketing year (September-August)
is largely dictated by the change in initial stocks. Carryover stocks are expected to be more than double that of
last year, yet are still relatively low by historical standards.
However, the larger stocks will push total supplies up
by about 5 percent from the previous year. Looking to
the demand side, domestic use is expected to register a
moderate increase from the prior year on the basis of
gains in both livestock feeding and use in the food, seed,
and industrial (FSI) category. The amount of corn used

for FSI is projected to rise 5 percent, led by increased
manufacture of high fructose corn syrup and ethanol.
Furthermore, feed use is also expected to post a year-overyear gain of 5 percent as pork and poultry production
expand. Overall, domestic use is projected at 7.33 billion
bushels, a new high. In addition, foreign demand and
improving export opportunities are expected to play a
role in coming months. Foreign sales of U.S. corn are
projected to rise 13 percent from last year, yet would remain
nearly a tenth below the level of two years earlier. And
while total use is not expected to reach a new high, the
current projection indicates this would be only the second
time it exceeded the 9 billion bushel mark. On balance,
ending stocks are anticipated to decline about 8 percent
to 864 million bushels. In comparison, ending stocks
averaged 1.21 billion bushels earlier this decade, even
when factoring in last year’s low level.
Going into the 1997/98 marketing year, the initial
level of soybean stocks is estimated to be a scant 115 million
bushels, the lowest since 1977. But the record harvest
will push supplies up by more than a tenth from the prior
year. The ample supplies will be reflected in lower prices—
compared to a year earlier—but will also encourage
gains in both domestic disappearance and exports. The
domestic crush (processing soybeans into meal and oil)
is projected to post a moderate gain to a new high. The
processing gains will be prompted by a modest year-overyear increase in the domestic use of meal and oil, and by
proportionately larger gains in exports of these products.
But the real news is soybean exports, which are off to a
relatively fast start in the current marketing year (SeptemberAugust) and are expected to hit a new high at 950 million

Soybean and wheat stocks are expected to rise relative to use
percent
20

dollars per bushel
7.40

Ending
stocks/use ratio
(left scale)

percent
40

dollars per bushel
4.80

Ending
stocks/use ratio

Soybean price
(right scale)

(left scale)

Wheat price
(right scale)

15

6.90

30

4.20

10

6.40

20

3.60

5

5.90

10

3.00

5.40

0

0
1990/91 ’91/92

’92/93 ’93/94 ’94/95 ’95/96
year ending August 31

*Projected.
Source: U.S. Department of Agriculture

’96/97 ’97/98*

2.40
1990/91 ’91/92 ’92/93

’93/94 ’94/95 ’95/96 ’96/97 ’97/98*
year ending May 31

Corn stocks/use projected to decline
percent
28

dollars per bushel
3.60

Ending
stocks/use ratio
(left scale)

21

3.20

Corn price
(right scale)

14

2.80

7

2.40

0

2.00
1990/91 ’91/92

’92/93 ’93/94 ’94/95 ’95/96
year ending August 31

’96/97 ’97/98*

*Projected.
Source: U.S. Department of Agriculture

bushels. If achieved, this would mark only the third
time soybean exports exceeded 900 million bushels (the
other years were 1981 and 1982). Overall, the sizable
soybean crop will more than offset demand and raise
ending stocks to a somewhat more comfortable level of
about 285 million bushels.
Carryover wheat stocks going into the current
marketing year (June-May) were much larger than a year
earlier, and along with the production increase, pushed
total supplies up a tenth from last year. Wheat imports—
mostly from Canada—are projected to be at about the
same level as the previous year and represent about 3
percent of available supplies. In comparison, utilization
is expected to register a much more modest year-overyear gain of 3 percent, as a decline in domestic usage is
offset by a strong increase in exports. But despite the
anticipated gain, foreign sales are still relatively low
compared to most of this decade. In sum, ending wheat
stocks are projected to rise to the highest level since
1990. Viewed from a different prospective, the ratio of
ending stocks to use is expected to be nearly 28 percent,
considerably higher than the average of about 20 percent
from the prior six years.
Trade prospects for U.S. grains and oilseeds are
highly dependent on foreign production prospects and
consumption patterns. Corn producers in the U.S. stand
to benefit in the upcoming year from an expected decline
in foreign coarse grain production, especially in Argentina,
China, and Canada. Despite the potential decline, consumption is projected to rise, pulling ending world stocks of

coarse grains lower next year. While potentially lower
stocks are not a problem at the moment, they would
become much more significant if production shortfalls
occur next year. This concern has been heightened by
the persistence of the El Nino weather pattern, which
continues to hold the potential to change world production patterns. In contrast to coarse grains, ending stocks
of wheat and oilseeds are expected to rise next year.
World wheat production is projected to reach a record
level in the 1997/98 crop year (partially due to a record
crop in China, the worlds largest wheat producer) that
will outstrip consumption and push ending world stocks
higher. Yet the outlook for U.S. wheat exports improved
because other major exporters experienced production
problems. In particular, the USDA estimated the Australian
and Canadian wheat harvests to be down by a third and a
fifth, respectively, from the prior year. Furthermore, world
oilseed production is expected to rise about 7 percent this
year and push ending world stocks up by 40 percent.
The USDA also forecast average prices for the 1997/98
marketing year. Though corn prices will receive some
support from the gains in domestic use and the improved
export situation, the midpoint of the USDA’s estimated
range is $2.65 per bushel, 5 cents less than the average
for the prior year. In contrast, soybean and wheat prices
will be pressured by larger domestic supplies. The midpoint of the estimated range for soybean prices is $6.15,
about 17 percent below the average of the past marketing
year. The midrange of the wheat price forecast is $3.45,
a fifth lower than the prior year.
Mike A. Singer

AgLetter (ISSN 1080-8639) is published monthly by the Research
Department of the Federal Reserve Bank of Chicago. It is prepared by
Gary L. Benjamin, economic adviser and vice president, Mike A. Singer,
economist, and members of the Bank’s Research Department, and is
distributed free of charge by the Bank’s Public Information Center. The
information used in the preparation of this publication is obtained from
sources considered reliable, but its use does not constitute an endorsement of its accuracy or intent by the Federal Reserve Bank of Chicago.
To subscribe, please write or telephone:
Public Information Center
Federal Reserve Bank of Chicago
P.O. Box 834
Chicago, IL 60690-0834
Tel. no. 312-322-5111
Fax no. 312-322-5515
Ag Letter is also available on the World Wide Web at
http://www.frbchi.org.

SELECTED AGRICULTURAL ECONOMIC INDICATORS

Percent change from
Latest
period

Value

Prior
period

Year
ago

Two years
ago

Prices received by farmers (index, 1990–92=100)
Crops (index, 1990–92=100)
Corn ($ per bu.)
Hay ($ per ton)
Soybeans ($ per bu.)
Wheat ($ per bu.)
Livestock and products (index, 1990–92=100)
Barrows and gilts ($ per cwt.)
Steers and heifers ($ per cwt.)
Milk ($ per cwt.)
Eggs (¢ per doz.)

August
August
August
August
August
August
August
August
August
August
August

107
116
2.47
101.00
7.10
3.49
99
56.70
65.80
12.70
63.5

0.0
1.8
1.6
2.6
–5.7
8.0
–1.0
–5.0
0.6
4.1
–3.3

–9
–13
–43
9
–9
–24
–5
–6
2
–20
–14

4
1
–6
23
22
–18
8
14
7
2
1

Consumer prices (index, 1982–84=100)
Food

August
August

161
158

0.2
0.4

2
3

5
6

Production or stocks
Corn stocks (mil. bu.)
Soybean stocks (mil. bu.)
Wheat stocks (mil. bu.)
Beef production (bil. lb.)
Pork production (bil. lb.)
Milk production* (bil. lb.)

June 1
June 1
June 1
July
July
August

2,495
499
444
2.26
1.35
11.3

N.A.
N.A.
N.A.
5.8
3.1
–1.6

45
–20
18
3
1
4

–27
–37
–12
8
4
4

Receipts from farm marketings (mil. dol.)
Crops**
Livestock
Government payments

May
May
May
May

13,286
5,727
7,539
20

–8.6
–13.6
–4.3
–28.6

–3
–7
2
–79

–3
–3
4
–97

Agricultural exports (mil. dol.)
Corn (mil. bu.)
Soybeans (mil. bu.)
Wheat (mil. bu.)

June
June
June
June

4,132
113
32
68

–5.4
–7.7
–21.0
35.4

–6
–18
–38
–11

4
–33
–9
–17

Farm machinery sales (units)
Tractors, over 40 HP
40 to 100 HP
100 HP or more
Combines

August
August
August
August

4,896
3,560
1,336
647

–11.5
–10.2
–14.8
–25.6

8
7
12
1

13
12
17
–14

N.A. Not applicable
*20 selected states.
**Includes net CCC loans.
AgLetter is printed on recycled paper
using soy-based inks

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P.O. Box 834
Chicago, Illinois 60690-0834
312-322-5111

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