Disappointing yields in some early harvested cornfields and the crop’s rapid move toward maturity across the Corn Belt continue to fuel concerns the U.S. production will fall short of expectations at a time when demand is very strong.
Although USDA’s weekly crop update rated U.S. corn conditions 70% good/excellent, unchanged from a week earlier and one percentage point above a year earlier, fast crop maturation is thought to be cutting grain fill short and hurting yields.
USDA reported 73% of the U.S. corn crop had already dented by Sunday, up from just 30% a year ago and the five-year average of 55%, while some 17% of the crop had already reached maturity against only 5% last year and the average pace of 11%.
With the U.S. corn supply-to-usage ratio already projected to be the tightest since 2003-2004 at 9.7%, the corn market is highly sensitive to signs supplies may not be as large as USDA projected earlier this month.
Early yield results have been highly variable, but there have generally been more bad reports than good ones.
Supply concerns may keep the corn market well supported ahead of the release of the next USDA Crop Report on Sept. 10 and we could see a fairly strong counter-seasonal rally if yields continue to run low as harvest moves north into the central Corn Belt.
Some decrease in the U.S. corn yield from USDA’s current estimate of 165 bu./acre has likely already been factored into corn futures prices. It’s hard to say whether a 1-bu. decline in the yield would push prices any higher at this point.
If the corn yield winds up 2-3 bu./acre lower, though, the futures market likely has some further upside as the market seeks to slow demand and ration supplies.
A 3-bu. drop in the U.S. corn yield would drop the U.S. corn stocks-to-usage ratio below 8%, not assuming any changes in USDA’s demand estimates. Supplies have not been that tight relative to demand since 1995-1996.
Editor’s note: Richard Brock, Corn & Soybean Digest's marketing editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.