Fundamentally Speaking

By Joel Karlin
Contributing Analyst

On May 10, the USDA will release its monthly World Agricultural Supply and Demand Estimates (WASDE) and this report will feature their first projections for the U.S. and world balance sheets for key crops.

Of particular interest to the trade is what initial yield the USDA will use for the 2013 U.S. corn crop in light of plantings that at least through April are the latest in memory.

This graphic shows the estimated corn yield given by the USDA at its annual Ag Outlook sessions in February and their first “official” forecast given in the May WASDE report expressed in bushels per acre (bpa).

The percent of the U.S. corn crop planted by May 5 is also plotted.

In the past, the USDA has adjusted its corn yield estimate up or down from their February Ag Outlook projection in the May WASDE depending on planting progress with fast seedings often leading to a higher yield estimate while conversely, a slow pace of plantings has led to yield reductions.

With the USDA now including mid-May planting progress as one of its explanatory variables in its new weather adjusted corn yield model, the amount of corn seeded by early May no doubt has some bearing on its yield estimates especially for those reports issued prior to the actual field surveys that begin in August.

A regression equation plotting the yield change vs. the percent of the nation’s corn crop planted by May 5 has a very good r squared of 75.1% and an equation of y = 0.099x – 4.8919.

Rearranging terms results in a midpoint of about 50% so it appears that if plantings exceed this mark by May 5the USDA has a tendency to increase yields from their February Outlook projection.

Vice-versa a planting number below 50% tends to result in a lowering of the year. It looks like each percent higher than 50% equates to a 0.1 bpa increase in yield with each percent below 50% resulting in a 0.1 bpa decline in the estimated yield.

Talk is that Monday’s crop planting number will be close to 15% and if this is the case then the USDA could chop its estimated 2013 U.S. corn yield by 3.5 bpa from the 163.6 figure given at this year’s Ag Outlook Forum.

Keep in mind that contrary to past Feb Ag Outlook corn yield estimates, the 2013 figure of 163.6 is actually lower than the year ago 164.0 and this is the only time we have seen that going back to 1998.

This is most likely due to the ongoing drought conditions that were much more intense in February than they are now so it appears that the USDA may have been a little more conservative than they otherwise would have been.

(KA)

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