The historically wet spring has caused drastic fluctuation in the U.S. Corn Market. Economists and Agriculturalists kept their eyes on market estimates and expected reductions. However, could anyone predict how much they would change in just one short month?
It’s All in the Numbers
According to Farm Futures, USDA sharply lowered its estimates for the U.S. 2019 Corn Production by nearly 9% since the last month. Making the estimate now at 13.98 billion bushels. The projected average yield potential reduced a full 10 bushels an acre to 166.0 bushels per acre. Additionally, there are higher than normal expectations of unplanted acres. Because of this, USDA lowered planted acres to 89.9 million acres, down 3 million from their earlier forecast.
If the estimates hold true, we can expect a dramatically lower supply. Total supply for 2019-2020 dropped to 15.925 billion bushels, down 1.235 billion bushels from May’s report.
Ending stocks will also see an impact. Chief Commodities Economist for INTL FCStone, Arlan Suderman, comments on the effect.
USDA cuts #corn usage for the new-crop year by 425 million bushels while dropping ending stocks to 1.675 billion bushels. Raises marketing year average cash price 50 cents to do so. #oatt
— Arlan Suderman (@ArlanFF101) June 11, 2019
Surprising Estimates
After the above average moisture much of the U.S. has received over the past months, production and yield estimates were expected to decrease significantly. Nevertheless, the new report was even lower than analysts expected. They predicted the agency would report 14.040 billion bushels on average yields of 171.14 bpa.
“USDA gave the corn market a wakeup call in today’s report taking the unusual step of cutting both its forecast of yields and acreage,” says Farm Futures senior grain market analyst Bryce Knorr. “The agency’s production estimate was just 91 million bushels from the working number I plugged into my latest Corn Outlook, but frankly, I didn’t think the government would go that low. While USDA assumes a little more price rationing that I’ve built into my forecast, the bottom line reflects tightening corn supplies in the year ahead.
Read more at farmprogess.com.
Still Chances for Improvements
As we have just seen, much can change over the course on a month. As the Cornbelt dries up, more Farmers plant their corn acres which could make average production hit closer to what was initially expected. Yields could still come in better than the 166 bushels per acre USDA is predicting.
It is important to consider prevent plant when thinking about the outlook for corn yields. Prevent plant continues to be a popular alternative for farmers this year. USDA is working to complete a survey which will be released June 28. This will show indications of planted and harvested areas.
With each month, we can expect to gain more clarity and certainty with the U.S. Corn Market.
