The USDA shocked trade with a larger than expected corn yield in the recently updated balance sheets. The August yield projection is a very early estimate and many variables and unknowns will affect the final tally in January. This is especially true this year with the extremely challenging spring. Since 2000, the USDA’s August to January yield figures have increased 9 times, decreased 9 times, and stayed unchanged once. The largest increase was in 2004 at 11.5 bushels per acre and the largest decrease came in 2010 at 12.2. This spring, many analysts were drawing comparisons between this year and 1993 and 1995. Those years, the August to January decreases were 15.3 and 12.1 bushels per acre respectively.
The USDA’s September release will contain actual field collected data as surveyors enter fields. The maturing crop will make yield estimates more accurate than previous estimates. Some analysts expect upcoming reports to show significant crop loss as they did in 1993 and 1995.
Recent rains exceeded expectations for much of the past week, pressuring values. Forecasts look to bring further improvement to moisture levels. It is thought that these rains will add additional yield potential to both corn and soybeans. Temperatures are trending cooler in the extended forecasts for northern and central Plains, Midwest, and Delta.
These cooler forecasts are raising concerns of an early freeze. The latest progress report indicated that roughly 4.5 million corn acres were not yet silking as of August 18th. It also showed that 24.5 million soybean acres had not yet set pods with 7.7 million not even blooming yet. Although upcoming temperatures are forecast below normal, history shows no correlation between August and September temperatures and early freezes. Most experts are forecasting near normal freeze dates at this time.
Each year during the last half of August private crop tours bring the market an early look into crop potential. A recent study by FC Stone showed that over the past five years above trend yields have led the new crop December corn contract to lose an average of over 11 cents over the last half of August. The new crop November soybean futures have given up an average 25 cents over the same time frame. Price action had been more sporadic prior to the past five years due to more variable crops.
Trade mostly shrugged off the lower corn yield estimates from the Pro Farmer Crop tour. History shows that the tour yield estimates have come in below the USDA 14 of 18 years. From 2012 to 2017 the Pro Farmer tour underestimated final yield compared to the USDA final yield by an average of 4.5 bushels per acre. The largest difference was in 2017 when their estimate was 9.1 bushels per acre below the USDA final yield. Last year their estimate was less than 1 bushel from the USDA’s final figure.
Poet, the nation’s biggest ethanol producer, announced recently they’ll be cutting back on production. They will idle their Cloverdale, Indiana plant indefinitely and slow output at half of its 28 locations, with the largest reductions will take place in Iowa and Ohio. This production cutback will reduce corn demand by an estimated 130 million bushels annually. According to Poet’s chairman and CEO, the reduction comes after the recent announcement of 31 new SRE waivers that have affected any near-term growth potential from year-round E15.
For more information, you may contact Mick Hoover at (515)-200-5115, or e-mail at email@example.com. The opinions and views expressed in this commentary are solely those of Mick Hoover. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position. Please visit our Risk Disclosure Page for more information on commodity trading.
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