Source: Todd Hubbs, University of Illinois
December corn prices approached contract lows not seen since the second week of July as August ended. The continued weakness in corn prices persists despite 2018-19 marketing year projections of stocks to use near eleven percent. The August Crop Production report forecasted 2018 corn production at 14.586 billion bushels with a yield of 178.4 bushels per acre. Recently, the corn yield forecast has come under scrutiny due to the latest industry estimates predicting yields below the current projection. The question is whether the corn production forecast will change enough to result in higher prices than those currently reflected in the market.
The USDA forecast for the 2018 U.S. average corn yield in August sits at 178.4 bushels, approximately seven bushels above the estimated linear trend from 1960. Using data since 1997, the change in the yield forecast from August to September declined in 11 of those years. The decline exceeded one bushel in five of those years and dropped more than two bushels in four years. The quick maturity for the crop this year combined with a decrease in the combination of good and excellent ratings over the last month from 70 to 68 percent provide some support for this speculation. By comparing crop progress for years since 1997, seven years witnessed the national crop at the current 61 percent of dent this early in the year. Of those years, three years saw final corn yield above the trend projection. When one excludes the drought year of 2012, the average corn yield for the remaining six years came in at 0.3 bushels above the estimated linear trend from 1960 to 2017. If the average deviation calculated above came to fruition this year, the national average yield would be approximately 172 bushels per acre.