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Parched U.S. Crops, Bad Export Sales in Question Ahead of USDA
Summary:
The government's starting U.S. corn yield for 2023 has already raised eyebrows for being notably above the prior record, and that number is likely to come under further scrutiny on Friday given near-record dryness across the Corn Belt since planting.
The government's starting U.S. corn yield for 2023 has already raised eyebrows for being notably above the prior record, and that number is likely to come under further scrutiny on Friday given near-record dryness across the Corn Belt since planting.
In some areas, crop and soil conditions have deteriorated to degrees matched only by 2012, one of the driest, hottest U.S. summers on record which featured terrible crop yields.
Still, the U.S. Department of Agriculture is unlikely to change corn or soybean yields in its Friday update based on how yields are formulated, though adjustments are possible next month if the dry pattern does not break down.
Yield Lowdown
USDA arrived at its 2023 U.S. corn trend yield of 181.5 bushels per acre using a weather-adjusted trend over 1988-2022, assuming normal planting pace and summer weather. Planting pace was normal this year and should be a non-issue.
Weather-wise, the model primarily relies on July, though it has a dry June variable that applies when June precipitation is in the lowest 10% tail of its statistical distribution. USDA identifies June 1988 and 2012, when Midwest rainfall was 29% and 58% of normal, respectively.
USDA did not change corn yield in June 2012, though that may not be relevant since the current yield model started in 2013. Slow planting in 2013 and 2019 caused corn yield reductions in those Junes, but there have been no other June changes to corn or soy yields since 2013.
Bloomberg's pre-report survey mostly supports the idea of unchanged yields this month. Nineteen of 25 analysts submitted 181.5 bpa for corn, and the lowest among the other six was 180. Twenty submitted 52 bpa on beans, equal to USDA's trend, and the lowest among the rest is 51.
June has started bone-dry in some states, especially in Illinois, Indiana and Ohio, where the first week featured between 5% and 20% of normal rains. But USDA would have to make assumptions about forward weather, which it does not do, for a yield change to be triggered by June's dry start.
If June stays sufficiently dry, a yield change could occur in July. The only July adjustment for corn or soybeans since 2013 was a small cut to soy yield in 2019 on late planting.
Although last year featured the fourth-driest midwestern June since 1988 at 64% of normal precipitation, yields were unchanged in June and July 2022. June 1992 was the third-driest, and USDA cut corn production in July based on unfavorable weather.
Rain is expected over the weekend for many dry areas of the Corn Belt, though whether that trend continues is still up for debate and yield potential hangs in the balance. As of Tuesday, some 45% of U.S. corn areas were in drought, the week's highest since at least 2012 and up from 26% two weeks earlier.
ExportsAnalysts may not be anticipating U.S. corn or soy production changes on Friday, but they likely expect to see softer old-crop corn demand. Thursday's export data seems to support a possible easing in both old-crop corn and soy exports.
As of June 1, U.S. exporters had sold 85% of USDA's 2022-23 corn export target, the second-lowest share in at least 15 years. Only 83% was sold by the same date in 2019, and final 2018-19 corn exports ended up 10% below what was predicted in May.
June 1 soybean sales accounted for 93% of USDA's 2022-23 export outlook, the smallest for the date in at least 15 years. Just 94% was sold by the same date in 2020, but cheap, plentiful beans that year sparked abnormally high U.S. sales mid-year, and final 2019-20 exports were fractionally above May's forecast.
On average over the past five years, June 1 sales covered 93% of USDA's May corn export target and 98% of its bean outlook.
Net U.S. corn sales in April and May were smaller than those for soybeans in that period for the first time since 2012. April-May bean sales were better than in the same stretch in 2021, though they were 65% worse than the five-year average.
Net corn sales below 1 million metric tons in April and May were led by Chinese cancellations and were the lowest for the period in over 15 years, some 82% below the recent average.
Source: Market Screener
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