FORT COLLINS, Colo. (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 will unveil its first survey-based yield outlook next Wednesday, and many analysts believe the agency’s August estimate will land above 180 bushels per acre (bpa) for the first time ever.
Corn bulls were relieved when USDA’s June survey showed 5 million fewer planted corn acres than in March, bringing next year’s domestic ending stocks well below 3 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.
USDA’s 2020 weather-adjusted trend corn yield would already reach a new high at 178.5 bpa. 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 Monday 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 2 bpa of the final result. It was around 3 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% of the corn crop was in good or excellent condition, well below the previous four years.
As of Sunday, the corn crop was rated 72% good or excellent.
ACREAGE AND YIELD
Aside from largely favorable weather, one of the factors increasing yield outlooks this year is 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 bpa off the U.S. mean. Another 600,000 acres were lost in South Dakota, which yields around 20 bpa 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 about 1 or 2 bpa 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.
On Tuesday I conducted a brief poll on Twitter asking about final U.S. corn yield. Around 600 voters participated, and the winning category was 178.5 to 181 bpa with a third of the vote. The skew was to the upside as 31% voted for 181 to 183 bpa.
The country’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% below the 30-year average and the ninth driest period since 1990. The third driest June-July in Iowa was in 2017 at 33% below, and 2019 was the seventh driest.
Iowa’s 2017 corn yield was 202 bpa, just 1 bpa shy of the previous year’s high, and the state’s third-largest yield of 198 bpa 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 favorably cool in Iowa and most of the Corn Belt, though starting this weekend the weather is set to warm up to normal or above-normal levels and sustain through at least mid-August.
The precipitation forecast for Iowa and surrounding states does not immediately call for the soaking rains that are needed, but the chances for a decent accumulation increase into next week.
The opinions expressed here are those of the author, a market analyst for Reuters.
Editing by Richard Pullin
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