Does the market finally agree with USDA on US corn yield? -Braun
The opinions expressed here are those of the author, a market analyst for Reuters.
By Karen Braun
NAPERVILLE, Illinois, July 17 (Reuters) -Grain industry participants in recent years have criticized the U.S. Department of Agriculture’s trendline U.S. corn yields since they have been too high versus final yields for five consecutive years now.
Another complaint is that USDA’s trend corn yields have been exceeding previously observed records, and the 2024 trend of 181 bushels per acre follows suit, sitting some 3.7 bpa above last year’s all-time high.
But speculators last week built record-short positions in Chicago-traded corn, and new-crop December corn CZ24 recently flirted with sub-$4-per-bushel, down about 14% over the last two months. Mild weather in the Corn Belt this month has encouraged the price pressure.
This market action suggests traders are finally supportive of USDA’s lofty yield ideas, and potentially bracing for something even bigger than 181 bpa.
But what does that look like?
BASIC SCENARIOS
If every U.S. state matched its all-time maximum corn yield in 2024, national yield would land at 188 bpa if incorporating the harvested area USDA published at the end of June. That would add nearly 600 million bushels (4%) to the current production estimate.
But states never achieve records all at once. If every state notches its second-best yield of the last decade, that puts national yield at 184 bpa, and assuming third-best reduces national to 180.5.
If each state's lowest two yields from the past five years are kicked out and the rest averaged, national yield comes in at 182.8 bpa. This is perhaps the most reasonable among the scenarios suggested thus far, implying that 181 is certainly doable in the right circumstances.
However, struggles usually ensue somewhere in the Corn Belt, and these penalties can add up. This is best demonstrated looking at 2021 versus 2023, the highest two yielding years at 176.7 and 177.3, respectively.
The 2021 season still holds the record corn yield for 12 states, including Iowa and Nebraska, and those 12 account for about 40% of total production. Only five states worth 11% of production set their records last year, including Indiana and Ohio, but last year’s national yield edged 2021.
Drought in the northwest Corn Belt hit the Dakotas and northern Minnesota hard in 2021, dragging down the huge strides made in other states. Kansas was the only major state notably off average corn yield in 2023.
Right now, U.S. corn conditions for most major states are at least near or above the recent mid-July averages. But Minnesota is a few points lower, Wisconsin, Texas and Tennessee are at least 10 percentage points off average and North Carolina is nearly 50 points below.
LOOKING TO AUGUST
Analysts are not afraid of big yields if conditions are right. Average trade guesses during 2018 and 2020 exceeded 180 bpa, and some analysts even saw the possibility for 178 back in 2014.
USDA’s statistics service will publish its first survey-based estimates for U.S. corn and soybean yields on Aug. 12, replacing the trend yields from the World Board. The August crop production estimates will now include necessary corn and soy acreage adjustments, which USDA announced last fall.
U.S. corn crop conditions, some 68% good-to-excellent as of Sunday, are the week’s best since 2020 and just above the week’s decade average of 67%. The last time USDA’s August corn yield was higher than in July was in 2020, and that also marked USDA’s highest-ever monthly yield print at 181.8 bpa.
In the last decade, August corn yield has come in higher than in July whenever mid-July conditions were 69% good-to-excellent or better, so 2024 narrowly misses that cut. But relatively mild weather is expected for the rest of July, which could make the case for a strong August yield.
The average trade guesses for August corn yield were too high in the last three years, but they were too low versus USDA’s published number in the six years prior to that.
Karen Braun is a market analyst for Reuters. Views expressed above are her own.
Graphic- U.S. corn yield, May versus final https://tmsnrt.rs/3Sc2coY
Writing by Karen Braun
Editing by Matthew Lewis
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