Comment: Interpreting bin-busting yield outlooks for the U.S. corn crop

Lower acres look to be offset by higher production in much of the Corn Belt

Reuters – The corn supply outlook in the United States got much tighter when it was revealed that farmers this year significantly reduced planted acres from their original plan, but unprecedented yields could load back up the balance sheet.

The U.S. Department of Agriculture unveiled its first survey-based yield outlook August 12, and at press time many analysts believed the agency’s August estimate will land above 180 bushels per acre for the first time ever.

Corn bulls were relieved when USDA’s June survey showed five million fewer planted corn acres than in March, bringing next year’s domestic ending stocks well below three billion bushels. But inventory estimates may jump again as largely ideal growing conditions should lead to a larger U.S. corn harvest than was initially expected.

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USDA’s 2020 weather-adjusted trend corn yield would already reach a new high at 178.5 bushels an acre. The agency has pegged yields above 180 bpa twice before, both in 2018, though the final result was below that mark.

Commodity brokerage StoneX (formerly INTL FCStone) on August 5 pegged corn yield at 182.4 bpa based on customer surveys and other factors. StoneX’s estimates are among a handful of numbers that the market looks forward to seeing just prior to USDA’s August report.

The group has a pretty decent track record in August when compared with final yield. Since 2012, there were six instances where StoneX’s August corn yield was within two bpa of the final result. It was around three bpa below the final in August 2015, though 2017 was the huge miss at nearly 14 bpa too low.

Most analysts severely missed the record 2017 U.S. corn yield both in August and in subsequent months as crop ratings were unusually low. At the end of July that year, only 61 per cent of the corn crop was in good or excellent condition, well below the previous four years.

As of August 3, the corn crop was rated 72 per cent good or excellent.

Aside from largely favourable weather, one of the factors increasing yield outlooks this year was the reduced number of planted acres in states where yields are significantly lower than the national average.

Between the March and June surveys, some 800,000 corn acres came out of North Dakota, where yields are more than 25 bushels an acre off the U.S. mean. Another 600,000 acres were lost in South Dakota, which yields around 20 bushels an acre below the national average.

Planted area also declined in the higher-yielding states, including the top four producers. A combined 1.5 million fewer corn acres were reported in June than in March in Iowa, Illinois, Nebraska and Minnesota.

All other things equal, the change in acreage distribution from March to June added around a bushel or two to the national yield, depending on initial assumptions. But yields in almost all major Corn Belt states are likely to be above recent averages, and that starts to make up for the acreage losses, especially in the biggest producing states.

Iowa, the U.S.’s top corn state has recently battled drier-than-usual weather, which could limit national yield potential. However, recent years show that good results in Iowa are still possible with a dry summer.

When weighting each agricultural district in Iowa by corn production, rainfall in June and July 2020 was 22 per cent below the 30-year average and the ninth-driest period since 1990. The third-driest June-July in Iowa was in 2017 at 33 per cent below, and 2019 was the seventh driest.

Iowa’s 2017 corn yield was 202 bushels an acre, just one bushel shy of the previous year’s high, and the state’s third-largest yield of 198 bushels an acre was recorded in 2019. One factor that sets June-July 2020 apart from 2017 and 2019 is that temperatures were a bit warmer this year, which could accentuate impacts from the dryness.

Both August 2017 and 2019 were slightly drier than normal in Iowa, but those months were also among the state’s coolest in recent decades, which is ideal for grain fill.

This month’s temperatures have started favourably cool in Iowa and most of the Corn Belt, though hotter temperatures have prevailed lately.

About the author

Columnist/Reuters

Karen Braun is a Reuters market analyst based in Chicago. The views in this column are her own.

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