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The Agricultural Newsletter
from the Federal Reserve Bank of Chicago
Number 1868

September 1995

AgLetter
A LOOK AT THE FALL HARVEST
The U.S. Department of Agriculture (USDA) released in
September updated projections for the fall grain harvest.
While anticipated corn production was revised downward from the prior month’s projection, the estimate for
soybeans was upgraded on the basis of an improved outlook for yields. In addition, the USDA released projections on usage and ending stocks. These indicate that
supplies and use for both corn and soybeans are expected
to register year-over-year declines during the upcoming
marketing year. However, it should be remembered that
last year’s stellar harvest provided a powerful spur to domestic use and exports. The current projections appear
more positive when viewed from a broader historical perspective. It should also be noted that the corn and soybean projections, coming early in the marketing year,
must be viewed as highly tentative.
In line with the expectations of several analysts, the
USDA reduced both its yield and production estimates for
corn. Most observers cited hot and dry weather during
August, as well as disease problems, as reasons for the
cutback. Corn production was forecast at 7.8 billion bushels, down a fifth from last year’s record harvest. However, this prediction is only 3 percent less than the 1989-92
average (excluding 1993 due to the effects of excessive
rainfall and flooding). The year-over-year decline in corn
production stems from a drop in both yield per acre and
the number of acres harvested. Nationally, corn yields are
expected to average about 121 bushels per acre, 17.5 bushels less than the record high set a year ago. But despite this
sharp decline, the predicted average yield—if achieved—
would still rank as the third highest ever. In addition, adverse weather last spring induced farmers to shift some
acres from corn to soybeans. The acreage reduction program (ARP) also lowered the number of acres seeded to
corn, as price support program participants were required
to set aside 7.5 percent of their corn base this year, compared to a zero set-aside last year. Consequently, the
number of corn acres to be harvested this fall is forecast to
be down by a tenth from last year, but only 5 percent below the 1989–92 average.

Many analysts also expected the USDA to reduce
their average yield and production forecasts for soybeans.
But to the surprise (and perhaps disbelief) of many observers, the September forecast for soybean production
was raised from the previous month. The USDA’s latest
yield forecast for soybeans came in at 37 bushels per acre,
five less than the record national average yield attained
last fall, but still well above the 1989–92 average. The
decrease in average yield is enough to pull soybean production down from last year despite a marginal gain in
the number of acres farmers expect to harvest. Harvested
soybean acreage is expected to hit the highest level since
1984, benefiting from some of the same factors that
helped limit the number of acres planted to corn. The net
effect of these yield and acreage shifts is an 11-percent anticipated decline in soybean production from last fall to
about 2.3 billion bushels. But despite the decline, this
production level—if achieved—would still rank as the
second-largest on record.
The past summer marked the third consecutive decline in U.S. wheat production. At nearly 2.2 billion bushels,
Corn and soybean production estimates
Yield
1994

Production

1995*

1993

(bu. per acre)

Corn
Illinois
Indiana
Iowa
Michigan
Wisconsin

156
144
152
117
141

126
125
125
120
124

1994

1995*

(million bushels)

1,300
713
880
226
216

1,786
858
1,930
261
437

1,260
650
1,437
252
360

District states 148.8

124.9

3,335

5,272

3,959

United States 138.6

121.1

6,336

10,103

7,832

387
223
257
55
21

438
220
447
59
37

396
228
403
58
34

Soybeans
Illinois
Indiana
Iowa
Michigan
Wisconsin

46
47
51
38
44

41
44
44
39
43

District states

47.4

42.6

943

1,201

1,119

United States

41.9

37.0

1,871

2,558

2,285

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

this year’s wheat crop fell 6 percent below the level of a
year earlier, and was also below the 1989–92 average by a
similar amount. The average yield came in at just under
36 bushels per acre, a 5 percent decline from last year.
Harvested wheat acreage registered a small decrease,
even though the ARP was left at zero for the third straight
year. Among the different types of wheat, a strong yearover-year gain in durum wheat acreage and production
was more than offset by a decline in the harvest of both
winter wheat and other spring wheat.
Reflecting national trends, both corn and soybean
production within Seventh District states—Illinois, Indiana, Iowa, Michigan, and Wisconsin—are expected to register significant year-over-year declines this fall. The corn
harvest in District states is projected to fall by a fourth
from last year’s record production. However, compared
to the 1989–92 average, the decline is a more moderate
6 percent. The precipitous year-over-year decline will result from significant reductions in average yields across
District corn fields as well as a drop in the number of
acres harvested. Michigan is an exception to the yearover-year decline in corn yields as the current projection
indicates a record high is within reach.
Soybean production in Seventh District states is also
expected to register a decline, although not to the same
extent as corn. While the soybean harvest is projected to
drop by 7 percent from last year’s record crop, it would
still rank as the second largest for all District states combined. In fact, production in Indiana is expected to increase from a year ago. Reflecting the factors that
discouraged corn planting, the number of soybean acres

harvested in District states is anticipated to be up 4 percent from last year to reach a new high. In contrast,
USDA analysts see the average soybean yield across District states dropping by a tenth from last year.
Although this year’s harvest compares favorably to
recent years, it doesn’t size up very well relative to the
record pace in usage over the last twelve months. The
imbalance is especially apparent for grains. An increase
in carryover stocks of corn from earlier harvests will provide only a partial buffer against the anticipated decline
in production. Consequently, supplies of corn in the marketing year that started September 1 are expected to be
down 15 percent from last year. With demand still holding strong, this will require relatively high prices to ration
consumption down to a better balance with available supplies. The decline in usage is expected to come from fewer export shipments and a drop in the amount of corn
fed to livestock and poultry. The amount of corn used
for food, seed, and industrial purposes is expected to
again reach a record level on the strength of continued
gains in the production of high fructose corn syrup and
ethanol. Overall, higher corn prices will likely trim total
usage of corn at least a tenth this year from the record
9.5 billion bushels used over the past twelve months.
The cut in corn exports, which surged some 65 percent
in the 1994/95 marketing year, may be smaller than that
for corn used in domestic feeding of livestock. But even
with the decline in overall usage, carryover stocks of
corn are expected to fall to about 730 million bushels by
next September. If realized, this would be the lowest
ending stocks level since 1976.

Corn and wheat stocks are expected to fall relative to use
percent
28

dollars per bushel
2.80

percent
40

Ending stocks/use ratio
(left scale)

Corn price
21

Ending stocks/use ratio

dollars per bushel
4.20

Wheat price

(right scale)

(right scale)

2.60

30

3.80

14

2.40

20

3.40

7

2.20

10

3.00

2.00

0

(left scale)

0
1989/90

’90/91

’91/92 ’92/93 ’93/94
year ending August 31

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

’94/95

’95/96*

2.60
1989/90

’90/91

’91/92 ’92/93 ’93/94
year ending May 31

’94/95

’95/96*

Soybean stocks/ use also projected to decline
percent
20

dollars per bushel
6.60

Ending stocks/use ratio
(left scale)

Soybean price
(right scale)

15

6.30

10

6.00

5

5.70

0

5.40
1989/90

’90/91

’91/92
’92/93
’93/94
year ending August 31

’94/95

’95/96*

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

The supply situation for soybeans is less constrained
than that for corn. The predicted year-over-year decline in
production will be cushioned by larger beginning soybean
stocks, which are at the highest level since 1987 thanks to
last year’s banner harvest. Consequently, supplies for the
upcoming marketing year (September-August) are projected to drop a moderate 5 percent from last year. Utilization is expected to register a similar decline, with most
of the decrease coming in export sales. Like corn, soybean exports posted a large gain in the marketing year
that ended with August. Soybean crushings (into oil and
meal) are expected to level off during the 1995/96 marketing year after registering a 10 percent rise during the
past year. Overall, it appears that usage of soybeans in
the marketing year that just started in September will exceed production, resulting in a moderate year-over-year
decline in ending stocks.
The decline in wheat production combined with
relatively low initial stocks to pull total supplies down
to the second lowest level since 1975. Utilization of
wheat is also expected to post a year-over-year decline
during the 1995/96 marketing year (June-May). Exports are expected to register a small decrease, while
feed use—despite higher corn prices—is projected to
contract by a third. In contrast, food and seed use will
likely increase from the past year. Overall, the decline
in utilization is expected to be less than the drop in
supplies, so that ending stocks will fall to their lowest
level in 22 years.

A relatively tight situation is shaping up outside the
U.S. with respect to stocks of coarse grains and wheat.
Beginning foreign stocks of coarse grains for the 1995/96
marketing year are 8 percent below the level of a year
earlier and 13 percent below two years earlier. Since the
U.S. typically accounts for over a fourth of world coarse
grain production, the expected decline in the domestic
corn harvest may well result in sharply tighter world
stocks of coarse grains. An even tighter situation exists
for wheat, as the ratio of world stocks to usage going into
the 1995/96 marketing year was at the lowest level in at
least 30 years. In contrast, the stocks of soybeans held
outside the U.S. at the start of the 1995/96 marketing
year are near the previous year’s level, while that for all
oilseeds is up a moderate amount.
The decline in U.S. corn production, strong domestic utilization, and the relatively tight levels of foreign
stocks are expected to push corn prices higher during the
1995/96 marketing year. The midpoint of the USDA’s
price prediction for corn is $2.75 per bushel, about 20 percent higher than the previous year’s average. Wheat
prices also stand to benefit from the tightening supply situation. The midpoint of the wheat price estimate is $4.05
per bushel. If achieved, it would be the highest average
in 21 years. Furthermore, soybean prices are expected to
post year-over-year gains. The midpoint of the USDA
soybean price forecast is $6.00 per bushel, a tenth higher
than the previous 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

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

101
112
2.59
81.10
5.68
4.17
92
49.30
61.30
12.30
63.6

0.0
–0.9
–1.5
0.6
–3.7
2.0
1.1
4.0
–1.0
1.7
4.4

4
11
20
–2
2
28
–2
15
–10
–1
5

–1
8
15
0
–13
41
–8
2
–18
–1
4

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

August
August

153
148

0.3
0.2

3
3

6
5

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

3,416
792
510
2.08
1.30
11.1

N.A.
N.A.
N.A.
–8.6
–11.3
–2.4

45
43
–10
3
0
0

–8
16
–4
5
–1
N.A

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

May
May
May
May

13,821
5,945
7,308
568

4.3
–2.7
16.0
–32.2

1
13
–5
–22

2
25
–7
–41

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

June
June
June
June

3,966
168
36
81

–6.3
–18.9
–21.4
0.2

20
94
33
6

26
51
–10
–10

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

August
August
August
August

4,351
3,204
1,147
753

–4.1
–7.4
6.7
–11.7

0
1
–3
20

28
27
33
22

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

Federal Reserve Bank of Chicago
Public Information Center
P.O. Box 834
Chicago, Illinois 60690-0834
312-322-5111

AgLetter

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