Last month USDA lowered their yield predictions due to extreme dry conditions in May and June. Now everyone will be watching this Friday’s August WASDE report to see if the yield estimate changes again and, if so, by how much.
Since so much is riding on the national yield, most traders are trying to predict that number using several different tools. The following are just a few:
Weekly Crop Condition Reports
Some market participants monitoring USDA’s weekly crop condition reports say overall conditions are worse this year versus last year, which suggests the 177.5 July estimate from USDA is too high. But in this week’s report corn conditions are now only 1% lower than last year.
The problem with weekly crop condition reports is they are subjective and based on someone’s opinion of how the crop is progressing. This makes it very difficult to compare conditions from year to year for any particular week. If the crop is ahead or behind normal growth for any week, comparisons can be unreliable. This week’s report shows the corn crop is almost 5% ahead of last year for the same week. Plus, there is high turnover rate among those providing reporting each year, which adds more inconsistencies.
Additionally, weekly crop ratings and the final yields have not historically correlated much. That’s why the best use of these reports seems to be just loosely comparing crop conditions in the surveys from the first report of the year and watching the overall direction of the ratings trend.
The Drought Monitor
Some market participants think the drought monitor, which shows 55% to 65% of the Corn Belt in some stage of a drought during the growing season, will mean substantially lower yields. However, it is important to remember the drought monitor focuses on long-term issues and corn can survive in a “long-term” dry weather pattern, as long as there are still timely rains.
Looking at July 2023 weather throughout the Corn Belt, rain has been extremely timely in many areas. For example, at our farm in southeast Nebraska the corn looked very stressed in late June. However, after small weekly rains throughout July, our corn crop is fortunately thriving, despite the high heat the past two week. Plus, high summer humidity has helped limit yield deterioration in many areas.
Also, when I compared the corn on my drives from Minneapolis, Minn., to south of Lincoln, Neb., in the middle of June and then again in late July, the corn looks much better now overall. Last year when I made the same drive during late July, there were drought conditions in eastern Nebraska, and those areas look much better this year. But again, this is all subjective based on my perspective and not easy to measure. Another farmer might think differently than me on the same drive.