Todd's Take

Another Look at the 2019 Corn Crop

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
Connect with Todd:
DTN's National Corn Index saw brief volatility in the summer of 2019 but has been quiet in October, still facing plenty of uncertainty about the size of the 2019 corn crop. (DTN ProphetX chart)

Judging by the day-to-day moves in December corn this month, one wouldn't guess there's much stress in the market as prices started October at $3.88 per bushel and closed Thursday at $3.86 3/4, roughly a penny less.

However, I do suspect plenty of latent anxiety in corn prices. We continue to witness the progress of a crop that endured the worst planting conditions in the modern era and are now finding harvest conditions challenging.

From USDA's Acreage report on June 28, we can do the math and see roughly 14 million acres of corn were planted in mid-June or later; much of it in less than ideal conditions. USDA's Crop Progress report shows the maturity pace of this year's crop closely in line with 2009 -- both years representing the slowest maturing crops since Crop Progress records began in the mid-1970s.

Among immature crops, the most vulnerable are in northern states where winter comes early, as the Dakotas have already experienced. A broader coverage of subfreezing temperatures will reach most of the Corn Belt by Halloween.

Some may remember the slow harvest pace of 2009 was greatly helped by a November that was largely dry and warm. As USDA's Crop Production report from December 2009 reported, "Temperatures throughout the month of November were warmer than normal for much of the country, reaching as many as 9 degrees above average in the northern Great Plains and Minnesota. Drier weather blanketed much of the Great Plains, Midwest, and Delta, promoting the rapid harvest of corn and soybeans and the seeding of over-wintered small grains."

See the 2009 USDA Crop Production report here:

https://downloads.usda.library.cornell.edu/…

For many analysts, the main problem of 2019 continues to be that this crop is so unusual -- so difficult to compare to prior years -- many don't know how to assess it. We saw an example of that in June when USDA didn't know how to handle 15.8 million unplanted acres of corn and hastily blurted out a planting estimate of 91.7 million acres.

I have to wonder if we are facing the same situation this fall with USDA's yield estimate of 168.4 bushels per acre in October. I don't dispute USDA's October estimate, but are we forgetting that only 58% of the corn crop was considered mature at the time? Not the usual 85% that most yield estimates represent in early October.

The crop will need cooperative weather to maintain October's yield estimate, and we've already seen winter storms in the northwestern U.S. Plains and a persistence of excess moisture in the northern Midwest. We haven't seen the kind of weather rescue yet that crop yields received in 2009.

My personal estimate of this year's corn crop has been 13.5 billion bushels (bb), a number that I've mentioned frequently at farm shows this fall. I won't be surprised if the actual number is lower, but will honestly be shocked if the crop turns out larger.

Normally, we would have final crop estimates by the Jan. 10 WASDE report, but even that is in question this year with harvest running later than usual. I hate to say it, but as DTN's Contributing Analyst Joel Karlin told us on Oct. 11, we may not have an accurate assessment of the 2018 corn crop until the Ag Census is released years from now, and the same situation may be true again for the 2019 crop.

See Karlin's interview at:

https://www.dtnpf.com/…

There was one other interesting challenge to USDA's corn estimates that came from the International Grains Council (IGC) Thursday. In its monthly Grain Market Report, IGC lowered its estimate of ending corn stocks for major exporters in 2019-20 from 65 million metric tons (mmt) to 56 mmt or 2.20 billion bushels (bb).

A little like USDA's unexpected drop in September corn stocks, IGC's surprise reduction came from a revision of corn supplies from a previous year and put their new total 320 million bushels (mb) below USDA's ending stocks estimate for the same four exporters.

With USDA currently estimating U.S. ending corn stocks at 1.93 bb in 2019-20, a few hundred million bushels here or there can have significant impact on prices.

A tough weather year like 2019 is extremely difficult for producers and forces analysts to dig deep and think again about the kind of information that is most important. Amid all the uncertainty, this analyst remains thankful for USDA's quarterly reports of U.S. grain stocks, the most reliable kind of information we have to keep our delusional estimates in check.

USDA's Jan. 10 WASDE report may or may not accurately portray this year's final crop estimate, but on the same day, the report of Dec. 1 corn stocks should keep the overall numbers roughly in line with reality -- the best we can hope for in these kinds of situations.

Todd Hultman can be reached at todd.hultman@dtn.com

Follow him on Twitter @ToddHultman

(BE/BAS)

Todd Hultman