The USDA Office of the Chief Economist last week released its latest World Agricultural Supply and Demand Estimates Report (WASDE). As expected, the corn supply and demand estimates were adjusted to reflect this year’s planting difficulties.
Largely not expected were the magnitude of the adjustments. Nationwide, planted corn acres were dropped 3 million acres and estimated production was reduced to 13.7 billion bushels, both estimates considerably less than May estimates. Estimated average yield, 166 bushels per acre, was reduced 10 bushels. Given the adjustments to both supply and demand, the marketing year average farm corn price for this year’s crop was increased to $3.80, up 50 cents from the May estimate.
What does the 50-cent increase in price potentially mean for Nebraska’s economy? Assuming the number of acres planted to corn is 9.4 million acres (97 percent of projected plantings), and the average yield is 181 bushels per acre (the trend with a linear trendline—last year’s average yield was 192 bushels per acre), results in an estimated corn production of 1.77 billion bushels, down slightly from last year’s 1.78 billion bushels. Applying the 50-cent price increase to this production estimate suggests the value of Nebraska’s corn crop has increased by $886 million over the past few weeks. Nebraska Farm Bureau research last year found that for every $1 lost in farm revenue due to tariffs, the Nebraska economy lost an additional $0.23 in labor income. Assuming the reverse is true, that every $1 in additional farm revenue results in an additional $0.23 in labor income, the increase in corn prices over the past few weeks could mean another $1 billion in total output for Nebraska’s economy.
Of course, these numbers are speculation as there are several months to this year’s growing season yet to come. And, Nebraska is not an island unto itself regarding corn production and consumption. Production in other states and countries, livestock and ethanol usage, trade relations, and marketing will ultimately play a role in determining the revenue received by the state’s corn producers. But, the mental exercise is an excellent reminder of how price changes in a key commodity produced in the state can affect the state’s economy.