Nationally, USDA projects wheat production to be 2.1 billion bushels, down 7.4% from 2012 levels. "The decline is attributed to higher abandonment rates and a return to trend yield from last year's record level," Joe Glauber, USDA's chief economist told participants and USDA's annual outlook forum Thursday.
Rice and cotton production are also forecast lower, largely reflecting lower planted area and a return to trend yields. About 57% of cotton production is located in regions currently in drought condition. If these conditions persist or worsen, adverse impacts on planted area, abandonment rates and crop yields seem likely.
Assuming normal weather conditions for spring planting and summer crop development, USDA is projecting a return to trend yields resulting in record crops for corn and soybeans in 2013.
Case for return to trend yields
Possible effects of the 2012 drought on 2013 yields is being widely discussed. Glauber sees several factors suggesting corn and soybean yields will likely to return to trend.
First, we have already seen some improvement in the eastern Corn Belt. While much of Indiana and Illinois was in drought throughout much of the summer, fall and winter rainfall has improved conditions there.
Second, studies suggest that little correlation exists between seasonal precipitation in one year and the next. A dry summer in 2012 has little implication for summer precipitation in 2013.
Third, research shows that corn and soybean yields are largely determined by summer weather conditions, with July weather being the most important.
"Little evidence suggest that low preseason moisture levels have significant impacts on corn and soybean yields," he concluded.
Prices for most grains and oilseeds to fall in 2013-14
Farm prices for most grain and oilseeds will be lower, reflecting larger domestic and world supplies. A return to trend yields will likely push corn prices down significantly as stock levels rebuild. Corn prices are forecast to average $4.80 per bushel in 2013-14, down 33% from 2012-13's record levels and, if realized, the lowest average price since the 2009-10 marketing year.
Likewise, larger supplies and increased carryout will weaken soybean prices to $10.50 per bushel, down 27%.
Cotton prices are expected to rise by 3% to 73 cents per pound for 2013-14, reflecting tighter domestic supplies.
Rice prices are projected at $15.20 per cwt., up 30 cents from the midpoint of 2012-13's price, in part reflecting smaller domestic supplies and ending stocks.