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Tuesday, January 25, 2005
I was gonna' post this over at Division of Labour, but I am having a hard time getting that server to work. So, I will post it here at Heavy Lifting.
Today's Seed-Stock Digest, a cattle industry newsletter (not online), provides the following information about the upcoming corn crop:
USDA's latest supply and demand report increased the projections for the corn crop to 11.81 billion bushels, and also raised the ending corn stocks to 1.96 billion bushels, double what they were emerging from last year. The nearly 2 billion bushel carryover virtually guarantees a steady to downward trend in corn prices unless a weather incident intervenes to make the 2005 crop appear to be a disaster.
But the projections don't stop there:
Some analysts are projecting that upwards of 2 million acres could be shifted from soybeans to corn as farmers are concerned about Asian rust in soybeans which would greatly increase the odds of two consecutive 11 billion bushel corn crops.
11.81 billion bushels --- 11,810,000,000 bushels. For corn, a good yield is about 135 bushels per acre. Therefore about 87.18m acres are planted with corn. That might sound like a lot, but Bush's Healthy Forest initiative concerned 190 million acres of government owned land (which is in itself only a fraction of government land). The amount of acreage dedicated to corn production is approximately 136,255 square miles or 3.33 times the size of Virginia (40,815 square miles) [other states listed here]
The going price for a bushel of corn in Iowa is about $1.70. Therefore, the corn industry will generate approximately 11.81Bx$1.70=$20.77B in revenue. For perspective, the corn industry is about the size of the ship and boat building industry - NAICS 3366 (data here).
How are farmers distributed? Some evidence from American Corn Growers Assocaition suggests approximatley 55% of all reported corn growers have less than 300 acres under cultivation.
So, 55% of corn growers would expect to have less than 40,000 bushels of corn or less than $68,000 in revenue on a market share (per farmer) no greter than 0.0000036.
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