Fundamentally Speaking

Grain and oilseed futures got waxed this past week on the heels of a bearishly construed USDA September crop production and monthly supply-demand report that pummeled feed prices with additional pressure seen since then on deteriorating trade news.

There continues to be talk of an upward paradigm shift in expected row crop yields with productivity gains in crop production exceeding demand.

Scientists are doing some great things in the lab to develop corn and soybean seeds that are not only resistant to pests and diseases but also making them more tolerant to adverse growing conditions and when weather is right, blowing the top off yields on the upside.

Last Wednesday, USDA hiked the 2018 U.S. corn yield to 181.3 bushels per acre (bpa) which is up from the August estimate of 178.4, the year ago prior record of 176.6 and trade expectations of a slight lowering to 177.7 bpa.

The fact is the U.S. has now produced a record corn yield three straight years with the 2018 projection well above the year ago prior peak and this comes even though weather this past growing season was not 100% perfect.

Concern about the impact of high nighttime temperatures perhaps capping yields appears to be misplaced as all but three of the top 18 growing states saw upward yield revisions.

MN was unchanged and ND, CO and TX were lowered, reflecting more adverse conditions seen in the Plains as opposed to the Midwest this past summer.

A number of these top states had record yields often surpassing their prior peak by wide margins.

The reason for this is a combination of record high plant populations and all-time high implied ear weights which is something rarely seen.

This graphic shows the 10 state objective corn plant population in plants per acre vs. the implied ear weight in pounds per ear along with the 10 state weighted yield in the yellow boxes.

The highest-ever plant population of 29,520 plants per acre combined with an all-time high 0.3594 pounds per ear results in a weighted ten state yield of 189.4 bushels per acre, 7.20 bpa or 4.0% above the year ago record.

If this is applied to the final U.S. yield last year of 176.6 it, portends a final 2018 national corn yield of 183.6 bpa.

(KA)