Newton: U.S. corn yield could end up below trend

Even if USDA lowers yield estimate on Aug. 10, upward price mobility could still be limited by large stocks.

John Newton, director of market intelligence for the American Farm Bureau Federation, says the trade estimates a nationwide corn yield average of about 165 bushels per acre. (Photo by Catrina Rawson)
John Newton, director of market intelligence for the American Farm Bureau Federation, says the trade estimates a nationwide corn yield average of about 165 bushels per acre. (Photo by Catrina Rawson).
By Dan Grant

Corn and soybean prices likely will remain range-bound, at least until Aug. 10.

That’s when USDA releases its crop production and world supply and demand estimates.

It’s at that point that projections for U.S. corn yield and production could evaporate, like a water droplet in the hot sun, according to John Newton, director of market intelligence for the American Farm Bureau Federation.

“USDA projected an average corn yield of 170.7 bushels per acre (earlier this month),” Newton told attendees of the Illinois Farm Bureau’s Farm Income & Innovations Conference in Normal.

“We expect to see this number come down a bit in coming weeks,” he continued. “Expect flat prices until we see the next crop report.”

Newton believes the average corn yield estimate could slip below the trend line set in recent years at around 166 bushels per acre. Planting issues this spring followed by wild weather deviations this summer have some wondering how low it could go.

“We’re not going to have a record yield, but I don’t think it will be much more than 5 or 6 percent below trend,” Newton said. “A lot of folks in the trade are currently talking about a national corn yield around 165.”

If the corn yield slips from above 170 to 165 bushels or below, total production subsequently would slip from the current estimate of 14.3 billion bushels to closer to 13 billion bushels.

“Eighty-eight percent of (U.S.) corn production area is in worse condition than last year,” Newton said. “That’s why I’m somewhat bullish on corn, but not super-bullish.”

Upward price mobility could be limited by large stocks of corn and beans.

The stocks-to-use ratio is at the highest level for corn since 2005 and the highest level for beans since 2006, according to Newton.

“It’s stock levels that provide headwinds for prices going forward,” he said.

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All uses of corn, except exports, are at or above last year’s levels, including ethanol use, which was raised 50 million bushels last month to 5.5 billion bushels.

Meanwhile, export growth remains a key driver of the soybean market. USDA projects soy exports will grow 11 percent this year to 2.1 billion bushels and increase another 3 percent in 2017-18.

“The story in the soybean market has been exports,” Newton said. “China takes in the equivalent of four Panamax boats of soybeans a day.”

Overall, U.S. net farm income declined 50 percent since 2013. Lower commodity prices and dwindling returns drive AFBF efforts to work on a new farm bill, improve the current farm safety net, and maintain and enhance ag trade, among other priorities, Newton added. 

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