U.S. Corn Yield Limited if Conditions Land Below 70%
Corn market participants often dismiss U.S. crop condition scores as meaningless, especially this early in the season. While they are still highly subject to change, the initial rating sets the tone for the growing season and can even cap yield potential – but do not expect a change to production outlooks just yet.
On Tuesday at 2 p.m. EDT, the U.S. Department of Agriculture will issue the initial condition ratings of the domestic corn crop in its weekly crop progress report. The corn market typically focuses on the percentage of corn sitting in the "good" or "excellent" category, which is determined by an extensive network of observers who are surveyed each week.
Over the past two decades, the first national corn ratings have been released anywhere between May 17 and June 3 depending on the progress of the crop. The 20-year average for the initial good-to-excellent rating is 69.2 percent after eliminating the high and low, while the recent outright five-year average is 72.4 percent.
In the past 20 years, above-average corn yields were not recorded at harvest if the initial corn rating came in below 70 percent.
This implies that if less than 70 percent of the 2017 corn crop rates in good or excellent condition on Tuesday, the yield ceiling is likely close to 170.7 bushels per acre, which is USDA’s computed long-term trend.
Whether the initial 2017 rating will land above or below 70 percent depends on who you ask as weather impacts have been variable and localized. But the cold and wet conditions that have dominated this spring have farmers from nearly every corner of the Corn Belt slightly uneasy about this year’s prospects, thus making it hard to truly gauge the current state of the crop.
High initial ratings do not always guarantee successful yields, though. Some 77 percent of corn in 2012 was in good-to-excellent condition initially, but the great start was no match for the historic summer drought that hacked off 25 percent of the crop.
The wet and cold weather – along with talk of significant replanting – would lead one to believe that sub-70 percent is a good bet for next week’s national corn rating. But early state-level ratings, which have already been released by some USDA field offices, provoke mixed conclusions at the national level.
As of May 21, just 51 percent of Illinois corn was rated as good or excellent. This was a sizable improvement over the previous week’s 42 percent yet well off the 69 percent in the same week last year.
Some 52 percent of corn in No. 10 producer Missouri was in good or excellent condition as of May 21 – a slight improvement over the 49 percent from a week earlier but well below the year ago score of 75 percent. Together, Illinois and Missouri produce just over 18 percent of the national crop.
On the flip side, corn ratings are high in Iowa and Minnesota, which together produce 27 percent of the U.S. crop. This week’s initial scores – 75 percent good-to-excellent in Iowa and 82 percent in Minnesota – came in higher than the year ago levels of 73 percent and 65 percent, respectively.
There will always be a debate over whether condition scores truly represent the status quo, but if the Iowa and Minnesota numbers maintain next week and the Illinois and Missouri numbers continue to climb as they have, the initial scores might not be as alarmingly low as one might think.
As of May 21, national corn planting and emergence were 84 percent and 54 percent complete, both 1 percent behind their five-year averages. But these numbers do not account for replanted corn, which according to several seed dealers in the Delta and Eastern Belt states, is nearing record levels in some areas.
The probability for considerable replanting – along with the next couple weeks of weather – could weigh on corn conditions. Indiana and Ohio – which combine for 11 percent of national corn production – and the rest of the Eastern Belt, will continue dealing with cool temperatures and possibly more wet weather through at least the first week of June.
Steady June Production
USDA projects the 2017/18 corn harvest at 14.065 billion bushels – a sizable decline from last year’s record 15.148 billion – and this target is unlikely to change before June 30.
Within the last 20 years, USDA has reduced U.S. corn yield between its May and June supply and demand reports four times and cut planted acreage only twice.
Slow planting prompted the 2 bushels-per-acre yield trim in the agency’s June report in both 2002 and 2009, and the same reason plus slow emergence caused the 5-bpa chop in June 2008. Yield was cut by 1.5 bpa in June 2013 based on delayed planting and changes to the weather adjusted trend.
USDA lowered planted area by 1 million acres between in June 2002 because of excessive moisture in the Midwest and it axed 1.5 million acres in June 2011 off of planting delays in the Eastern Corn Belt and Northern Plains. Ironically, final plantings were very close to USDA’s May number in 2011 and they exceeded it in 2002.
Slow planting and excessive moisture has been a common theme for many U.S. farmers this year. But the near-average national planting and emergence numbers will probably not warrant USDA to make a production adjustment in its June supply and demand report, unless the issues in the east escalate to an extreme degree in the next couple of weeks.
Initial corn ratings for the years in which USDA made June production cuts were notably below average – save 2009 – but otherwise there is no obvious link between the initial crop condition scores and whether USDA makes changes in June.
On June 30, USDA will publish revised planted and harvested area figures in its acreage report, which generally puts the acreage conversation to rest in favor of weather and yields in the eyes of market watchers. But the discussion might not go away as fast this year with prevalent corn replanting and the potential switching to soybean acres.
USDA does not explicitly adjust production on June 30, but the new acreage numbers allow analysts to compute a de facto production figure.