The US Agriculture Department is likely to boost its already massive forecast for corn yields in the coming months as historical data show its estimates of big crops tend to grow as harvest nears. The prospect of corn plantings that could yield upwards of the 168 bushels per acre forecast by the USDA on Tuesday is likely to act as an anchor on prices that have already fallen 20 percent from their spring peak.
The yield outlook on Tuesday was the USDA's first of the year to use reports from the fields instead of trendline projections. It was the biggest ever for July. A strong export forecast fuelled buying in the corn market on Tuesday, but the big yield outlook capped the gains. Chicago Board of Trade December corn futures, which track the crop that will be harvested in the fall, closed up 4-3/4 cents at $3.60-1/4 a bushel.
Timely planting and good weather have prompted a sharp sell-off in corn futures during the past month, with the December contract shedding 89 cents from the high hit on June 17. Since 1993, when the USDA first began issuing corn yield forecasts in July, above-average initial forecasts have typically been followed by even bigger yield reports when combines began to roll through fields.
"At some point, these trendline yields will have to be increased," said Brian Hoops, analyst at Midwest Marketing Solutions. "Most of the weather we have seen has not had a real negative effect." So far this year, good rains have typically preceded an increase in temperatures across the Midwest, and the moisture has shielded crops from potential damage caused by scorching heat, Hoops added. In the 10 years with the biggest July corn yield views since 1993, final yields have come in even bigger seven times, according to USDA data. The average gain in those years is 3.6 bushels per acre, with the biggest, a gain of 11 bushels, coming in 2009.
The three years when the final yield has come in smaller than the July forecast have averaged a decline of 15.2 bushels. The biggest cut came in 2012, when a severe drought descended upon the Corn Belt just as the crop was pollinating. Final yields that year were 22.9 bushels below the July view. But the corn crop has developed relatively stress free so far this year, with good-to-excellent ratings rising to 76 percent as of July 10 from 72 percent at the end of May.
If the La Nina weather system hits the Midwest with hot and dry conditions in the coming weeks, it would likely arrive after most of the corn crop has passed through its critical pollination phase of development when yields are determined. "I do not remember a time in the last 10 or 12 years where we have had steadily increasing crop conditions in the month of June and the yield did not go up," said Mike Zuzolo, president of Global Commodity Analytics. But Zuzolo cautioned that the huge corn acreage, the third biggest since 1944, means that farmers likely seeded some marginal fields with corn, which could drag down final yields.
Comments
Comments are closed.