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Could the USDA Be Overestimating U.S. Corn Yield?
Recent conversations with corn producers throughout the Midwest suggest yield results for this year’s crop are generally very good, and at the same time, somewhat disappointing from expectations.
Parts of the Corn Belt saw very wet conditions early in the growing season, followed by an extended dry pattern, and then another very wet period, which may have tempered yield potential.
Most producers are experiencing yields about as anticipated, and in some cases less than anticipated. Very few seem to be experiencing larger-than-expected yields. Last year, a record yield across the nation (176.6 bushels) was reflective of very good growing and maturing conditions from mid-July through harvest. Most producers were pleasantly surprised with larger-than-expected yields.
This year’s story could be different.
Last year, the November USDA Supply and Demand report raised corn yield 3.6 bushels an acre. While this number was a surprise to the market, it was not necessarily a surprise to producers who were harvesting record yields.
This year’s feedback is somewhat different. While some are experiencing excellent and even record yields, many have been somewhat disappointed that yield results are not as good as expected, let alone as good as last year.
This year saw early-season drought issues in Missouri, Kansas, and parts of surrounding states, and heavy rainfall totals along the southern Minnesota and northern Iowa border. This could make it difficult for this year’s national average yield to reach the October USDA Supply and Demand report estimate of 180.7.
Bottom line, we find it challenging to expect yield results to increase 4.1 bushels. Could the November report this year hold a lower yield surprise similar to last year’s big increase? Perhaps it will.
From a marketing perspective, this time of year suggests that patience will pay dividends. Current prices are above contract lows, and still well below where most would like to sell, and likely below where a postharvest rally can take them.
Now may be the time to wait for the market to come to you. However, don’t take your eye off the ball, as new crop prices are already offering a futures price near $4.00.
Corn futures for 2020 contracts are trading near $4.10. Rallies beyond this point should be viewed as opportunities to start making sales for next year and possibly the following year. We would not recommend jumping in with both feet.
At the same time, in each of the last five years, December corn has traded under $3.50 in the same calendar year as harvest. Consider taking advantage of favorable prices while they are available, and make it part of your overall strategy.
If you have questions or comments, contact Top Farmer at 1-800-TOP-FARM Ext 129.
Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.