Fundamentally Speaking

Here it is the end of July and the survey period for the USDA August 2020 production report is ending also.

Though it appears that actual field assessments for this August report may not be as influential as satellite imagery data and farmer assessments of their crops, current corn ratings suggest the USDA would be fully justified in keeping their 178.5 bushel per acre (bpa) yield projection which is already a record.

These end of July crop conditions along with a dramatic improvement in Corn Belt weather over the past three weeks could however result in a figure higher than that, perhaps significantly so.

This graphic shows a scatterplot of end of July U.S. corn crop ratings at the bottom along the x-axis vs. the % USDA August corn yield estimate deviated from the 1986-2019 trend of final yields on the left along the y-axis.

This year's U.S corn crop rating as of the end of July 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 is 760.

This is above the five-year average of 743, the ten-year average of 722 and the 20-year average of 724.

The relation has a very high R squared of 84.4% and running the formula the 2020 end of July crop rating of 760 implies a yield 5.2% above the 1986-2019 trend which we figure is 175.2 bpa.

This calculates to an August 2020 USDA corn yield projection of 184.3 bpa and is another 487 million bushels (mb) of corn on top of the 15.0 billion bushels (bb) seen being produced.

Given this situation, it appears that the carryout for U.S. corn next year could very well be in excess of 3.0 bb and makes one wonder where we would be if we hadn't lost that 5 million in acres between the March Prospective Plantings report and the June acreage figures.

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