After last week’s new acreage numbers and ongoing concerns about delayed planting, some are wondering if USDA might take the relatively unusual step of lowering yields in the July World Agricultural Supply and Demand Estimates.
The USDA has “adjusted its yield estimate just five times in the past 22 years in the July crop report, but traders expect this to be another year in which it does so,” says Arlan Suderman, senior market analyst at Water Street Solutions.
He says “the trade is banking on USDA lowering its corn yield to an average trade guess of 165.4 bushels per acre, down from 166.8 bushels previously, with additional cuts in later monthly reports. That’s a reasonable estimate based on recent drops in crop ratings and anecdotal reports from across the southern half of the Midwest. However, it would go against USDA’s historical tendency, and so there is a chance it may not happen.”
Ted Seifried, chief market strategist for the Zaner Ag Hedge Group, is one of those who thinks the projected 166.8 bu. per acre yield is becoming increasingly unattainable.
“This would have been the second-best yield on record behind the record set last year,” he says. “Now that we have gotten into the growing season … USDA's 166.8 national average yield is looking more and more impossible, despite a 1% uptick in crop conditions. At this point in the growing season, it will take near ideal conditions the rest of the way to get an exceptional corn crop.”
Others suspect the USDA will hold firm on yields in tomorrow’s report, especially given the acreage data still outstanding while farmers in four states are resurveyed.
“In the May WASDE Report, USDA stressed that July weather is responsible for 90% of corn yield--something I’m not sure I agree with,” says Chip Flory, editorial director of Pro Farmer and host of Market Rally Radio. “Still, they used that reasoning to justify not increasing the yield from trendline despite--what was at the time--a quick planting pace for corn.”
He highlights the lessons of 2008 and 2013, with lots of rain. Despite adjustments up and down, though, USDA’s May corn projection proved mighty close to the final number: 153.9 bu. per acre in 2008, matching the projection; and 158.1 bu. per acre in 2013, a difference of .1 from the projection.
“If they’re going to make an adjustment ahead of the August survey data, the adjustment is most likely to come in May, based on planting pace … or in June to reflect early-season conditions…,” Flory says. “Since they didn’t make the downside adjustment in June, my best guess (and it is only a guess) is that USDA leaves the corn yield at 166.8.”
He also expects USDA to maintain its current soybean yield estimate of 46 bu. per acre. “I think the USDA is committed—at least this year—to wait for the August survey data before making any adjustment to yield,” Flory says.