Chore time for me isn't what it used to be when I was growing up on our eastern Iowa farm, but doing morning horse chores before I head in for work gives me a little time to think about the day ahead.
I was thinking…
... what happens if this year's corn crop doesn't live up to expectations.
That conversation could take us in many different directions: Impacts on total 2009-10 demand... impacts on 2010 plantings... and (most importantly at the moment) impacts on 2009-crop corn prices.
The reason I'm wondering what might happen if the 2009 corn crop doesn't live up to expectations is because expectations are exceptionally high. FC Stone last week estimated a national average corn yield of 163.3 bu. per acre... Informa Economics, Inc., put the corn yield at 164.7 bu. per acre. (And the Memphis-based consulting firm reportedly sees an eventual national average corn yield of 168 bu. per acre.) Keeping in mind the current record national average corn yield is 160.4 bu. per acre (2004), those are some lofty yield expectations. But, those aren't the highest yield estimates I've seen this year. One satellite-based yield-estimating firm has jacked up its national corn yield estimate to 169.9 bu. per acre.
In last week's Pro Farmer newsletter, we told Members we're leaving our yield estimate at 160.1 bu. per acre... and, in fact, are getting more comfortable with the estimate as (very) early harvest results start to come into the office.
I'll admit -- I was nervous about the estimate when some excellent early season results starting coming in from the Mid-South. Some growers in Mississippi, Alabama and Arkansas were talking about best-ever yields (and yields any grower in Iowa and Illinois would be happy to put in the bin). Then it started raining.
I'll admit -- when it was 58 degrees and raining on Aug. 25 (the day we estimated the national average yield of 160.1 bu. per acre), my immediate concern was we were too high. Then conditions improved in the last few days of August and turned nearly perfect for the first three weeks of September. A week of less-than-ideal conditions transitioned to what we've got now -- cool, wet and a likely end of the growing season this weekend. (And... dare I say it... a chance of light snow Sunday morning here in northeast Iowa.) And some key production areas have already seen up to one-third of the corn crop "cash it in." Anthracnose made some corn fields in Iowa look like a killing frost came in the third week of September. Some of that corn has been harvested... and it's weighing light -- in the 50- to 52-lbs. range.
In Illinois, USDA says 5% of the corn crop has been harvested, and growers and farm managers are reporting much of what has been harvested is loaded with diplodia. The mold is being reflected in yield by way of a lighter test weight, but that's not nearly all the story -- quality discounts on some of the diplodia corn is making it worth less than $1 per bushel.
And even though it's Oct. 6, maturity of the corn crop is still a concern. According to USDA, only 41% of the Illinois corn crop was mature as of Oct. 4; just 51% of the Indiana crop was mature; 71% in Iowa; 37% in Minnesota; 63% in Nebraska; 46% in Ohio; and just 57% of the South Dakota corn crop was mature. Outside of the Crop Tour states, North Dakota had just 23% of the corn crop mature; Colorado 63%; Kansas 89%; Missouri 78%; Michigan 38%; Pennsylvania 53%; and Wisconsin's corn crop was just 33% mature. Nationally, 57% of the corn crop was mature, compared to 70% last year at this time and a five-year average of 84% mature as of Oct. 4.
If -- IF -- the growing season does end Saturday-night, Sunday-morning... well -- we're not going to realize full yield potential in the frost areas. Then it'll be a scramble to try to figure out just how much damage has been done to the corn crop. Unfortunately, frost damage is not easily measurable until combines roll and the crop is weighed. And frost-damaged corn typically holds moisture longer than if the crop naturally matures... so harvest (and proof of damage) is delayed while growers wait for points of moisture to evaporate from the crop.
So... yes. We're sticking with the 160.1 bu. per acre national average corn yield. That estimate (made Aug. 25) was based on anticipation of a "normal" end to the growing season. And we realized that -- this year -- a normal end of the growing season would not allow a "normal" finish for the corn crop. We factored in a normal first frost (or even a few days late) and the expectation that test weights on a portion of the crop would be lighter than 56 pounds. So... even if the growing season ends before one-third of the U.S. crop reaches maturity, our yield estimate of 160.1 bu. per acre has already factored that in. What that means: Even if the growing season does end this weekend, we probably won't adjust our corn yield estimate down. (In reality, it depends on how far south a killing frost reaches.)
The reason is simple... there are enough ears out there this year to support a big yield (and 160.1 bu. per acre is "big") even if the top end is knocked off this year's yield by frost.
So... what if the crop doesn't live up to the lofty yield expectations? We're starting to see the impact now... corn futures seem to have locked in a seasonal low, traders are now "looking for reasons" to buy rather than sell futures and December corn futures are working on violating resistance at the September 15-16 double-top at $3.47 3/4. That's pointing December futures to a challenge of resistance at the August high of $3.76. Past that, we'll wait to see just how much upside momentum the market generates.