“If, heaven forbid, we get another yield that is below the projected trend — as was the case this year — I don’t think anybody could predict a top. Stocks-to-use wouldn’t drop much below 5 percent; the question is, how high would the price have to go to allocate a crop that short?”

Right now, Anderson says, “It’s a very tight market, and the prices we’re seeing are well-supported. Generally, the situation with corn and beans is as tight as we’ve seen at this time of year in a long, long time. “

But, he cautions, “Don’t think that situation can’t change quickly. Think back to early 2012, when the USDA was projecting a 164-bushel yield for this year’s corn crop. What if we had got that 164-bushel yield? We wouldn’t be here today talking about how tight the market is. We’d be talking about how high corn is piled up in Nebraska and elsewhere. It’d be a much different conversation.

“Things can change quickly. We’re in a situation where these markets could be really volatile, and it’s all going to hinge on weather.

“It sounds like there’s a lot of downside in the market — but there could be another drought. There still is a drought going on. Will we get back to normal yields? At this time of year, talking about market outlook, the only thing that makes any sense is to assume we will get back to normal. There is time for that to happen.

But it’s not necessarily going to happen. That’s the risk for the upside.

“The most recent seasonal drought outlook from USDA/NOAA shows persistence of drought over part of the country. Draw a circle 150 miles out from Omaha, Nebraska, and it looks pretty dry. The good news is there is a lot of improvement in parts of Illinois and Indiana, which were just devastated this year.

“But, if we get into 2013 and the western corn belt is still dealing with drought, all bets are off on where markets could go. Those areas need soil moisture recharge pretty badly. Looking at the NOAA chart on the amount of additional rain needed to bring the Palmer Drought Index into the low end of the normal range, we can see that in Iowa, in a lot of cases, they need 9, 10, 12 inches of rain to get back to normal.

“Can they make a good crop starting the year with below normal rainfall? Yes, but for some peace of mind we’d like to see them start the year with adequate soil moisture — and they’re going to need a really wet winter to make that happen.

“If we do get back to normal yields, we’ll be dealing with a much different supply situation next year than this year. But that’s the big question right now, whether we’ll get back to normal. A wet winter in the Midwest would make a big difference.

“If weather cooperates at all, we’ll get a big crop planted. If we get back to normal on yields, the supply side of the market will look a lot different by next fall. So, keep that in mind as you make plans for 2013.”

As analysts make projections for the 2013 corn crop, Anderson says, “We’ll hear a lot of disagreement about where to put the yield number. There will be all manner of debate about this, and you’ll see numbers from 155 bushels to 167 bushels.

“It has been a long time since there’s been this much disagreement at the beginning of the year on corn yields. Over the past 10 years, there has hardly been a 1 bushel spread between anybody’s yield estimates. This coming year will change that.

“My yield estimate for 2013 is 158.7 bushels. That isn’t based on soil moisture maps, El Niño, La Niña, sunspots, what have you — just a simple trendline. It’s a pretty low estimate, but it highlights how much an impact this year’s drought could have on yield.”

But yield is only half the production equation, Anderson notes — acreage being the other part.

“I think we’re going to see a lot of corn planted in 2013. We have the acres in this country to do it. Looking at total acres planted to 10 major crops, we planted 261.1 million acres in 2012, the most since 1991.

“For corn, soybeans, cotton, and wheat in 2012, we planted a total of 242 million acres. Doing a ‘what if?’ illustration for 2013, what if we planted 96 million acres of corn, 78 million acres of beans, 10 million acres of cotton, and 56 million acres of wheat, for a total 240 million acres? Is that doable? I think so — we planted more than that last year.

“I’m not predicting those acreages, but it’s a realistic number for those crops. Then, what if we plant that many acres and we attain my estimated corn yield of 158.6 bushels, 43 bushels for soybeans, 820 pounds for cotton, and 44 bushels for wheat?

“Those aren’t predictions, just realistic yield numbers. With those acreages and yields, we could increase corn use by quite a bit, from 11.1 to 12.8 billion bushels, a nice rebound in one year’s time. We could incrementally increase soybean usage and maintain strong exports, increase cotton use, and drop wheat use just a bit because won’t feed as much as in 2012.

“Look what would happen to the stocks-to-use ratios: We’d get well above 10 percent on corn; back up over 6 percent on soybeans, which is fairly healthy; 30 percent on cotton; and about 30 percent on wheat.

“Corn has been driving the train in the grain markets,” Anderson says, “but even as tight as the grains supply situation is now, if we get back to normal yields, things will turn quickly. So, producers and end users of these crops need to keep their eyes on how this situation is playing out.”