Corn Update – June 6, 2017

The CropProphet forecasts for U.S. corn yield and production have dropped by about 1.5% in the past two weeks, and the U.S. yield outlook is now slightly below the long-term trend (see figure below). The abrupt drop in expected yield and production on May 30 was caused by the release of the USDA’s first crop condition report for corn, because the report indicated that corn condition is worse than normal for the time of year. According to the May 30 report, only 8% of the corn crop was rated as “excellent”, which was the lowest since 2002 for the start of the season, and the fraction of the crop rated as “poor” was also high compared to historical norms.

 

CropProphet uses the USDA crop condition data as an independent predictor to refine the yield and production forecasts for U.S. states and for the overall U.S. crop. On a fundamental level the CropProphet system is based on county-level regression models that use daily weather and satellite data throughout the growing season, but in late spring and early summer the state-level crop condition reports provide considerable value as an independent estimate of crop health. As the season advances, the crop condition data becomes less important relative to the weather and satellite data, and the CropProphet forecasts rely more heavily on the county-level predictors.

The chart below illustrates the statistical connection between early-season crop condition and the final U.S. corn yield anomaly (in percentage terms) from 1986-2016. While the overall correlation at this early stage in the season is fairly poor, there is clearly a modest degree of predictability, and in particular it is notable that significantly above-trend yield has never occurred when the early-season condition was below average. The converse is not true, as very poor yields have occurred in years when corn started well (e.g. 2012). The position of the dashed line shows the corn condition index from the May 30 report, and the vertical extent of the line indicates the central 90% confidence interval from the latest CropProphet forecast for U.S. corn yield. Finally, the green marker shows the most likely U.S. corn yield, which is currently 1.5% below trend.

 

As discussed above, CropProphet’s county-level yield forecasts do not include any influence from the crop condition data, and the pattern of recent county-level changes is mixed (see figure below). Considerable improvement has occurred in southwestern Iowa and in parts of Minnesota, but expected yields have dropped from northern Illinois to Ohio. Much of the deterioration in the eastern Corn Belt is related to cloudy and very wet conditions during May, and especially in Indiana, where nearly a quarter of counties received record rainfall for the month of May. The deterioration in the county-level forecasts in this area confirms the poor conditions reported by the USDA and indicates that corn yield is already rather likely to be below trend in Indiana and Ohio.

The next update to the corn commentary will occur on June 20.