Fundamentally Speaking

In the first of what will be a number of private crop estimates ahead of the August 12 USDA crop production report, the firm StoneX projected U.S. 2022 corn production at 14.417 billion bushels (bb) with an average yield of 176.0 bushels per acre (bpa) and forecast this year's U.S. soybean harvest at 4.490 bb with an average yield of 51.3 bpa.

Their estimates, based on customer surveys and other factors, are what the company predicts will be final production not what it expects the USDA to say a week from Friday.

Some feel these figures are a little bearish as trade estimates have been running around 172-175 for corn and around 50-51 bpa for soybeans.

Most crop yield models incorporate a number of variables in their calculations including weather indicators such as June and July precipitation and temperatures, top and subsoil moisture readings and the latest USDA crop condition reports around the end of July among others.

Along these lines, using our usual ratings system where we weight the crop based on the percent in each category and assign that category a factor of 2 for very poor, 4 for poor, 6 for fair, 8 for good, and 10 for excellent and then sum the results, we look at the end of July crop ratings for the top 18 producing states and the U.S.

We have data from the start of national ratings back in 1986 to the figures that were furnished on Monday except for North Dakota and Tennessee where their ratings started in 1999.

We plot the 2022 end of July rating, that from a year ago, the lowest and highest readings since 1986 and the 1986-2022 average.

Noteworthy that the July 2022 U.S. corn rating of 700 is below the year ago 726 and is in fact the lowest end of July rating since the horrible drought year of 2012 when it was 512 and the second lowest since 2006.

There are only four states that have end of July readings above last year: IA, MN, ND and SD.

Note that the last three states all had horrible drought conditions a year ago so beating the 2021 readings is rather easy especially North Dakota whose 522 rating was their lowest ever.

States that are well behind their year ago ratings include CO, IN, KS, KY, MO, NE, NC, OH TN and Texas.

In fact, only 6 of the 18 states have 2022 end of July crop ratings above their respective 1986-2022 average and this sounds like the recipe for crop yields to also come in below trend, perhaps by a sizable amount in many of the Plains and southern states that were doing much better a year ago.

We will be posting some more blog pieces on this leading up to first USDA crop report but other than CO, as indicated in the grey rectangles, the correlation coefficient between end of July crop ratings and % final yields deviate from 20-year trend is rather high especially in IN, KY and MO where it is over 90%.

This indicates that the end of July corn crop rating is a highly important explanatory variable in calculating by what percent the 2022 corn yields of the top states and U.S. will deviate from this year's trend figure.

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