Can Corn Hit Trend-Line Yield?
Jun 13, 2017
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Corn has taken a step back to start the week on a wetter forecast. With crop conditions rated 67% good to excellent the crop is starting behind where it has been in the last few years and the rain is needed. But, is this the end of the corn rally?
It is very early in the year to make an argument on where the national averagecorn yield/production might end up. However, this crop has had its share of issues getting started. In many areas a very wet spring was followed by an extended period of hot and dry leaving us with a highly variable corn crop at this point.
On the surface there might not be too much to worry about yet, the drought monitor is mostly drought free (with the big exception being Montana and the Dakotas), and corn planting ended up finishing pretty close to average. However, many of the fields I have seen look very behind on development and there is evidence that the wet spring followed by hot and dry have had an effect.
What might be giving us a clearer picture is the NOAA's Vegetation Health change from last year. Here we can see that, year over year we are looking at a much different situation. This might be giving us a more complete story of where this corn crop stands right now:
The drought conditions are obviously represented in the Dakotas, but look at Iowa, Southern Minnesota and Central Illinois. Now keep in mind that last year we set a new record National average yield at 174.6 bushels per acre, but the current USDA (trend-line) yield estimate is not far off at 170.7 bu/acre.
The current two week forecast is a bit wetter than what we were looking at last week and some rain could go a long way after the heat we have seen. However, I do wonder if there has been some damage done already that could make it very difficult, maybe nearly impossible to hit the USDA's yield and production estimates. With seemingly very little weather premium in the corn market it will be interesting to see how things look in a few weeks.
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JulyCorn Daily chart:
JulySoybeans Daily chart:
Producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.
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