USDA’s Historic Cut to Yield Sends Corn Limit Up

A map of month-to-month change in corn yield estimates shows a sharp drop in the Iowa crop.
A map of month-to-month change in corn yield estimates shows a sharp drop in the Iowa crop.

USDA dramatically cut its 2020 average corn yield projection Tuesday, sending futures prices limit up. The 3.8 bu. per acre drop in the national projected yield is the largest in more than a quarter century according to Arlan Suderman of StoneX.

“Two things jump out at me, obviously a much bigger cut in corn yields than expected, and then that flowed through in the quarterly stocks numbers. Stocks in all positions ended up being very friendly and a great reaction here so far, limit up on corn, and that seems to be the surprise of the day so far,” notes Chip Nellinger of Blue Reef Agri-Marketing.

Reaction was swift with nearly all corn contracts up the 25-cent limit, pushing well above the $5 mark.

The sharp reduction in corn left analysts scratching their heads as to where those bushels came from.

“How did they take 3.8 bushels off of the national average corn yield?” AgriTalk Radio’s Chip Flory asks. “After the derecho in Iowa at the end of the growing season, and the drought that was kind of stealthy, people didn't want to pay much attention to it, but those dry conditions at the end of the 2020 growing season, it took it had an impact on the corn and soybean crops. I don't think anybody can deny that now.”

On the #StatChat Twitter discussion, head of the crops division at USDA’s National Agricultural Statistics Service Lance Honig indicated his office had an incomplete picture of the crop in November.

When asked about the stark drop, Honig responded, “There are a couple of factors. One is the timing as harvest was not complete in Nov. The other is the overall sample size of our survey work. For today's final estimates we reached out to >77,700 producers, far more than in Nov.”

Related: USDA Chief Economist Seth Meyer discusses January USDA reports:


What does it mean going forward? Corn and soybean supplies are going to be tight for some time.

“Basically, we're at pipeline stocks on soybeans, the market has done a decent job of dealing with that,”Flory notes. “We drop this corn carry over much more and we're going to be pipeline on corn as well.”

It was the ending stocks numbers that sent the markets running, according to Flory. The World Board cut 150 million bu. from the corn ending stocks number taking it down to 1.552 billion bu. Soybean ending stocks were cut 35 million bu. to 140 million bu. total.

Will the spike in corn prices slow Chinese purchases? Until this week, there had been no export sales announcements since October.

“The bottom line is if China has a need for more U.S. corn, they're going to buy it,” Flory says. “Think back to the rally that we had in 2011 through 2013 when we were looking at $16 -$17 soybean futures. That did not slow down China's buying interest. I don't know if there's a price point in China, that slows down demand if they need the product. And if they need corn to support that growing hog industry that they've got over there, the rebuilding of the hog industry that they've got going, if they need the corn they're gonna buy it. I don't know if price has a lot to do with it.”

Full commentary from Chip Flory:


USDA Report Analysis: Is the U.S. Running Out of Soybeans to Sell?

Watch Analysis of Tuesday's USDA Reports

WASDE Lowers Corn/Soy Ending Stocks Again



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