In the last couple of years we have seen several organizations publish regression analysis that forecast national yields vs. crop conditions. Thus far this year, those sort of regression models appear to be be forecasting a yield 1-3 bu below trend, or 167-169 bu/acre, in line with where fair value analysis suggests the market is trading right now.
However, there is a lot that can happen between now and harvest that can affect yields, and especially in the Northern half of the Corn Belt there is a lot of maturation yet to take place.
So the main question for the marketer is: what sort of a range of potential national yield scenarios should I be prepared for? While crop condition ratings are behind those of the past several years, they aren’t all that bad outside of South Dakota (where they actually trail 2012’s slightly) and with favorable weather in August in Iowa and Minnesota, perhaps an above trend yield in those states can still be achieved. Should the South Dakota crop fall 25% below trend, as in 2012, the drag on the national corn yield would be the equivalent of about 2 bu/acre.
July weather patterns seems to indicate that a trend-to-below trend yield seems likely in the Southeastern and Western Corn Belt but there is still potential on either side of trend for the Northern Corn Belt. Right now the most likely range of national yield outcomes seems to fall between about 162 and 170 bu/acre.
Recent history suggests we would need a forecasted national corn yield below 160 bu/acre a month from now to justify $4.00 Dec corn into September. That would push the 16/17 stocks/use forecast down to about 11%. In the last three years USDA’s September stocks/use forecast has been between 11.5% and 16.5% and December corn has traded between $3.20 and $3.90 during September in those years. In the most recent crop report, USDA forecasted a 16.2% stocks/use ratio assuming a 170.7 yield for this year.
So even though the weather forecasts and crop conditions haven’t been ideal, it is notable that forecasted production totals this year still seem large enough to provide some insulation against a major price spike should yield estimates sag a little.