Chip Flory: What If Crop Yields Top The Trend?
July 20, 2021
I’m trying to avoid “Backyarditis” – the affliction when you believe conditions all over the Corn Belt are the same as in “my backyard.” Ahead of the July 12 World Agricultural Supply & Demand Report, my backyard was dry (only an inch of rain in the previous 30 days).
Compare that to Farm Journal Agronomist Ken Ferrie’s Crop Tech Inc. location in central Illinois where the 30-day rainfall tally was pushing 12".
TOO LITTLE TO TOO MUCH The U.S. Drought Monitor highlights potential crop trouble spots caused by too little rain, but it does nothing to reveal potential yield loss caused by too much rain. Ferrie knows too much water killed planted areas of crop fields. “But, if you can look away from the drowned-out spots, we’ve got really good corn and soybean yield potential,” Ken told me on the July 14 “AgriTalk.” USDA’s survey for the July spring wheat and durum crops confirmed yield threats in the Northern Plains, and corn and soybean yields in those states are also threatened. Except several growers from dry areas reported, “Based on how little rain we’ve had, I can’t believe how good the corn and soybean crops look.” Those growers were “yield optimistic” in mid-July.
WHAT WILL AVERAGE BE? So instead of planning for a yield drag from too dry in some areas and too wet in others – what if it all averages out? What happens to the market outlook if yields push above trendline?
Let’s look at the corn numbers:
A national average yield of 185 bu. per acre would be a corn crop of 15.6 billion bushels. (USDA’s July projection was 15.165 billion bushels based on a yield of 179.5 bu. per acre.)
Beginning stocks of 1.082 billion bushels and a few imports would push supplies to nearly 16.75 billion bushels.
If total use reaches 15.25 billion bushels, carryover would be just under 1.5 billion bushels. That’s a 9.7% stocks:use ratio.
A $5 national average on-farm cash corn price projection makes sense.
Let’s talk soybean numbers:
A national average yield of 53 bu. per acre would be a 4.6-billion-bushel crop. (USDA’s July projection was 4.405 billion bushels on a yield of 50.8 bu. per acre.)
Beginning stocks of 135 million bushels and light imports would push total supplies to 4.75 billion bushels.
Total use of 4.53 billion bushels would leave 220 million bushels in the bin, creating a stocks:use ratio of 4.9%.
A national average on-farm cash price of $11.50 would be expected.
A 2021 big-yield scenario suggests lower prices than seen in mid-July, but not low enough to leave financials stained with red ink.