BERNANKE LEAVES DOOR OPEN FOR EASING... Federal Reserve Chairman Ben Bernanke’s highly anticipated speech from the economic summit in Jackson Hole Wyoming, reiterated his position the Fed stands ready to provide help, but did not announce a fresh stimulus package dubbed “QE3.” But Bernanke hinted QE3 could be coming by saying the Fed will “provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”
Highlights from Bernanke’s speech (Click here for more):
- Labor market growth is “painfully slow.” High unemployment will wreak structural damage for many years.
- The Fed will continue to use traditional and nontraditional means to boost economic
activity. Nontraditional policies are more risky, but appear manageable; therefore their continued use shouldn’t be ruled out. (This is key.) - In addition to the labor market and global restraints, the housing market and
fiscal policy are the two primary headwinds holding back economic growth.
WHAT’S THE DOWNSIDE RISK FOR 2012 SOYBEAN CROP? Remnants of Hurricane Isaac increases risk to the corn and soybean crops beyond what we saw during Crop Tour. Scouts on the 2012 Pro Farmer Midwest Crop Tour were generally surprised by the low pod counts in most soybean fields. Even in Nebraska’s irrigated bean fields, pod counts (on average) didn’t reach expected levels. That’s some strong evidence soybean plants don’t like heat any more than corn plants.
We also identified the number of beans per pod as risk to our national average soybean yield estimate of 34.8 bu. per acre (midpoint of a range from 34.1 bu. to 35.5 bu. Per acre). We asked some scouts this year to figure the average number of beans per pod at some stops to help identify a potential problem. In a normal year, we see between 2.45 and 2.5 beans per pod. The range of beans per pods on the few fields we evaluated for this was 2.05 beans per pod to nearly 3 beans per pod. This year, we expect the average number of beans per pod to drop to just under the “normal” range.
The viability of those beans, however, is questionable. We saw some beans inside of pods that were being aborted. That’s another reason to expect a lower-than-normal number of beans per pod this year. Bean size is another concern for the bean crop. Normally, it takes about 2,500 beans to make a pound. This year, that could push to as high as 2,750 (a 10% decrease in bean size). However, rains moved across a wide swath of the Corn Belt Aug. 25-26. Normally we’d say that removes some of the downside risk to bean yields, but the quick return of 90°-plus temps this week likely erased the benefits of the post-Tour rains.
WHAT’S THE DOWNSIDE RISK TO THE CORN CROP? Each year we put all the corn samples from the Crop Tour into one spreadsheet and calculate simple averages of all the data points that go into the yield calculation.
Ear counts: On Tour, we count the total number of ears that will make grain in two 30-foot plots. This is one of the most telling pieces of data each year and does an excellent job of pointing our yield expectations in the right direction. This year, the average number of ears found in 1,195 corn fields was 84.73, down from 93.95 ears found on 1,172 corn samples last year. That’s a 10% decline in ear populations, accounting for much of the year-to-year yield decline.
Grain length: We pull the fifth, eighth and 11th ear from one row in the plots to keep ear selection consistently random. On those ears, we measure the length of grain on each ear in inches, ignoring tip-back at the end or unpollinated blanks at the butt of the ear. This year, the average grain length was 5.66 inches, down 12.5% from 2011’s 6.47 inches of grain per ear. That’s the average grain length on more than 3,500 sample ears.
Kernel rows: We also count and average the number of kernel rows around the ears. This year’s 15.13 kernel rows was down 4.2% from last year’s 15.79. Row width: The final data point is the row width in the field. This year’s 29.84 inches is 0.9% more narrow than last year’s 30.14 inches. The narrowing of row width partially offsets the lower ear count.
Our national average corn yield estimate of 120.25 bu. Per acre released last week is based on expected harvested acres of 87.141 million. We arrived at that level by first adding 1 million
acres to the expected 2012 planted corn acreage tally (based on preliminary Certified Acreage data from the Farm Service Agency). We then adjusted down the harvested acreage percentage to 89.5% of planted, to arrive at the 87.141 million harvested acres. That’s still 220,000 acres below USDA’s harvested acreage tally in the August Crop Production Report.
However, if we assume the 39 samples in the 2012 Crop Tour data with an adjusted calculated yield below 10 bu. Per acre will not be harvested, it could drive harvested acres even lower. These 39 samples represent 3.26% of all samples. Removing that percentage from our harvested acreage estimate of 87.141 million would drop harvested acres to 84.3 million acres.
The average yield on those acres, however, would rise to at least 122.14 bu. Per acre for a crop of 10.296 billion bu., 182 million bu. below our current estimate of 10.478 billion bushels.
That’s our worst-case scenario for corn: 122.14 bu. Per acre on 84.3 million harvested acres for a crop of 10.296 billion bushels. That’s the crop’s downside risk.
HARVEST STIRS UP BLACK CLOUD... There’s little doubt about which fields are being harvested as you drive across the Corn Belt this year. A distinctive black cloud is engulfing combines due to the high presence of smut in the corn crop. With heavy rains from Hurricane Isaac set to push into the central and eastern Corn Belt, Pro Farmer crop consultant Dr. Michael Cordonnier says the presence of smut will increase. But grain quality is far from the only concern. Dr. Cordonnier says rains and high winds from Isaac will also likely cause some yield loss given the poor quality of stalks and shanks. For beans, Dr. Cordonnier says the impact from Isaac is more uncertain, but will likely be a net negative. While some beans will be helped by the late-season moisture, there will also be some crop loss in the Delta.
