Unusually good US corn conditions and the quick pace of the crop have many traders and analysts baking heavy corn yields into their balance sheets, some as high as 180 bushels per acre, well above last year's record. If corn yield reaches a new high, it will be despite unfavourably warm weather during pollination and less-than-ideal rainfall patterns that some areas of the Corn Belt have experienced.
However, cooler weather is expected for the whole region through the end of July, which is perfect timing to support both the filling of kernels and the huge yield theory. Record yields are very much in play as the growing season has been more favorable than not, but the degree of that record is important due to its highly varying impact on supply levels through mid-2019.
USDA's World Agricultural Outlook Board has placed the baseline, or trend, yield at 174 bushels per acre for 2018, a significant rise over last year's baseline of 170.7 bpa. If realized, 174 bpa would be the third-largest US corn yield in history. Many view this number as the absolute floor, as yields have soared well past the initial trend in the last two years.
But to reach a national yield of 180 bpa, blockbuster yields must be observed across most of the Midwest, and the weather up until now might not support that notion. Although USDA's current projections show US corn carryout plunging 23 percent by the end of August 2019 to 1.552 billion bushels, market participants know that all it takes is a huge yield forecast next month to offset much of that decline.
But there is plenty of room to factor in big yields before the corn supply multiplies out of control. If all other 2018/19 US corn balance sheet items stay the same next month, ending stocks would be unchanged on the year at 2.027 billion bushels with a yield of 179.8 bushels per acre, some 3 percent higher than USDA's baseline yield.
A yield of 183.1 bpa would be needed to push 2018/19 carryout past the 2.293 billion bushels from 2016/17, which was a 29-year high. This would represent a 13 percent increase on the year. A 178-bpa yield would top last year's record and result in a carryout of 1.88 billion bushels, a 7 percent reduction on the year.
As of Sunday, the US Department of Agriculture's statistics service reported that 63 percent of the US corn crop had entered the silking stage, which marks the beginning of pollination. This is the second-fastest progress rate in at least 38 years, behind 2012. It was clear by mid-July 2012 that US corn was headed for disaster after little to no rain had fallen across the Midwest in more than a month. Only 31 percent of the crop was rated in good or excellent condition by July 15 versus 72 percent on the same date this year.
Since the fastest progressing crops are the result of warmer temperatures, often unfavorably warm ones, 2018 is not in the best of company in terms of comparable years. Only one year, 1987, featured above-average yields when more than 50 percent of the crop was silking by mid-July.
It is hard to directly compare 2018 with 1987 because there have been many technological advances and national yield has risen by about 45 percent. But corn is still not immune to excessively warm and/or dry conditions.
By July 15, 1987, some 58 percent of the corn had reached the silking stage, and this remains the third fastest in records dating back to 1981. Final yield ended up 5 percent above the long-term trend.
In 124 years of records, May and June of 2018 were the second warmest across the Midwest and 1987 was the fifth warmest, two spots ahead of the same period in 2012. This pushed the crops along more quickly than normal, and corn silking began in late June in both years.
But the last three to four weeks have been warmer than average across the Corn Belt, meaning that some corn pollinated in unfavorably hot temperatures. The same period in 1987 featured average to cool temperatures during the same period, which is one major difference between the two years.
The impact of warm pollination weather has already started showing up in some fields. Pictures posted on Twitter suggest that tip-back has occurred from Missouri, through southern Illinois, and southern Indiana, at least. Tip-back is when the corn ear does not fill to the end with kernels, thus lowering the yield potential.
It is unclear how widespread this issue is, or whether these are isolated cases. Since the corn is more advanced than usual, this means that grain fill weather matters earlier than normal, and favorably cool weather is likely for much of the Corn Belt through the end of the month. Cooler nights help corn develop fatter kernels, increasing the yield.
This was of key importance last year. Crop ratings were below average all season, but one of the coolest Midwestern Augusts on record likely contributed to the all-time high national yield of 176.6 bpa, despite drier weather across many top states that month.
There is a notable difference in soil moisture between this year and last year. By the end of June 2018, soil moisture across the Midwest was at a five-year low, at least, according to data from Thomson Reuters' Agriculture Weather Dashboard. June 2017 moisture marked a five-year high.
In the past, negative impacts of warmer temperatures during grain fill have been somewhat offset by abundant rainfall during July and August. This period in 2016 was the wettest in 124 years of records for the Midwest and 1987 takes the ninth spot. The 2016 crop finished 3 percent above trend, despite warm nights.
July rainfall will probably end up below average for most of the Corn Belt, so it may be up to August to deliver replenishing rains to areas that need it most. Soybeans are likely to benefit more than corn under a wet August scenario, as the filling of pods relies heavily on moisture at the right time.
The record July and August rainfall of 2016 allowed 14 US states, worth 84 percent of national production, to set record soybean yields that year, driving the national yield to an all-time high 52 bpa. Twelve of those states currently retain 2016's record.