The U.S. has seen its export share of the world market decline, from about 70  percent to 80 percent share down to about 30 percent, says Welch. Soybeans have dropped to about the same amount, while wheat has gone from 50 percent of market share down to the high teens.

“There are some export opportunities out there. Looking at a 10-year period of grain consumption and production patterns, China has gone from being the No. 2 exporter of corn in the world to being the No. 5 importer.

“Long-term trade projections for China are for increasing imports for their textile and feed-grain sectors — they will maintain their self-sufficiency in food grain. They will not depend on us for wheat and rice. They’ll import our corn, soybeans and cotton, but they’ll take care of themselves when it comes to food.”

Thirty-percent of China’s corn production is for food use, says Welch. Their corn industry is a much larger component of its food industry than in the U.S., where 13 percent of production is for food use.

“Evidently, there is a tremendous prejudice against the human consumption of genetically modified food products in China. They can’t produce it in China, but they’ll import it for their livestock. China’s acreage is as much as that in the U.S., but their yields are about half of ours.”

The 2013 corn crop looks to be much improved over last year’s drought-ravaged crop, says Welch.

“It looks like USDA’s estimate of 155 bushels per acre is doable. Trend line yields give us an average of 157, so it looks like we’re on track to reach that number. The trend line projects a yield of 157 this year and 159 bushels in 2014. Can we maintain that rate of growth as we expand our corn-growing areas? There are some definite concerns about that.”

The drought in 2012 dropped corn yields 21 percent below trend, says Welch, whereas in 1988, with a drought of similar magnitude, yields dropped about 25 percent below trend.

“Even if we can maintain that projection of yield growth, the average amount we were above trend from 1980 to 1995 was 8 percent. The average amount we were over trend was 14 percent. From 1996 to 2010, the average above was 3 percent up and 3 percent down. The last 16 years, prior to 2012 was a period of relative stable production in terms of average yields.”

This year’s projected yield of 155 bushels per acre is “just a hair” below trend, says Welch. “This would give us a 13.8-billion bushel crop. That’s holding harvested acres at 8.9 million and yield at 155. Of course that’s an all-time record high corn crop. We could give up a lot of bushels and still have a record corn crop.”

If U.S. feed and residual use continues to increase, it could get back to about 5.5 million bushels, says Welch. He also sees a slight increase for ethanol and a marginal increase for food.

“There will be some export opportunities, so I see us rebounding to average levels of the last four to five years on the feed and export side. In estimating prices for next year, I plugged in different acreages, at 97 million, 95 million and 93 million acres of corn, along with a trend line yield of 159. Currently, USDA is estimating a 1.8 billion-bushel carryover.”

Iowa State University economist Bob Wisner states that given the inelasticity of the demand curve in corn, a 1 percent change in the corn supply can change the price by about 5 percent, says Welch.

“Given our current numbers, with 97 million acres of corn next year and a trend line corn yield of 159 bushels, we’d be looking at a season-average price of about $4.40 per bushel.

“At 95 million acres, the price would be about $5, and at 93 million acres, about $5.40. There’s a great deal of variability around those production numbers for 2013, which gives us price variability.”

University of Illinois budgets for 2014, using a $250 cash rent and a 200-bushel yield, calculate that the break-even price for corn in central Illinois is $4.10 per bushel.

“So there’s still a good incentive to plant corn. The soybean/corn price ratio and other things will play into planting decisions, but there’s still a cushion there to grow corn with these kinds of numbers.

“With any kind of acreage question or yield concerns, we could get that price back up pretty quickly, and I think there will be some bargaining opportunities for us.”

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