Under the Agridome

USDA Says 175.4 Bu/Acre Corn: Knock Me Over With a Spoon

Thursday, November 16th, 2017

Cold weather has returned to Southwestern Ontario with snow predicted for much of the province overnight. Its pretty tough for farmers who still have soybeans out in the field. As of last week about an estimated 30% of Ontario soybeans were still out. Add a little bit of snow to the mix and it is never good. Meanwhile, the Ontario corn harvest rolls on and your loyal scribe is very busy at it. You remember a few weeks ago I talked about the vicious cycle of agricultural productivity. Well, those Ontario corn yields are proving that maybe Statistics Canada was right with an average yield projected of 169.5 bushels per acre.

Of course, this past summer you might have never known. Weather was very uneven across Ontario and many areas east of Toronto had a difficult time getting planted. So as November grows older, it would seem there was some magic in these fields. Yield monitors posted on Twitter of 260 bushel per acre might be more common than you think.

It certainly has surprised me, although I’ve always been a bit of a bear when it’s come to the American crop. This past summer I traveled to the middle of Iowa after hearing stories about how dry it was throughout the American Midwest. Through my travels I thought everything looked pretty good and even though I knew that was a very small sample, something told me the American crop might be one for the ages. So with the November USDA crop report being released this morning, even a bear like me wasn’t ready for the announcement that the Americans are expecting a corn crop of 175.4 bushels per acre. Somebody knocked me over with spoon.

I was checking my iPad around noon today just to get the results of the November crop report. I was in the midst of a heavy corn day, loading trucks and pushing that combine ever further down the field. Needless to say, when I heard 175.4 bushels per acre, I was somewhat aghast. The USDA’s own NASS crop conditions reports have been running below 2016 all summer and into September. Seeing a big jump up in yield was above everybody’s expectations. Corn dropped seven cents on the day. Corn users are certainly getting a bargain.

The USDA is expecting a crop of 14.578 billion bushels of corn. This has pushed old crop ending stocks out to 2.487 billion bushels, which should act as a weight on prices all the way into next spring. Of course, the final nail in this big crop might come in January when the USDA issues its final estimates. As is, it puts us into next year, where even a weather scare won’t serve as a harbinger for higher prices. We had that in 2017 and look to where it is got us. The corn bears are firmly in control of the market.

The USDA November soybean number was a little bit more expected. They came in at 49.5 bushels per acre, the same as their October report. Soybean ending stocks were actually reduced 5 million bushels and January soybeans lost $.14 on the day. With the Brazil crop planted and growing as I write, soybeans might offer a glimmer of hope compared to corn. This is taking place, even as the USDA increased soybean-beginning (2015-2016) stocks. Yes, their beginning stock, which doesn’t make a lot of sense but it’s the USDA’s prerogative. That’s maybe one of the biggest reasons soybeans were down on the day. It is just a bearish time for grain.

Of course futures markets are one part of our pricing equation and the Canadian dollar is the other. It is currently fluttering in the 78 cent range US putting cash corn around $4.12 a bushel in southwestern Ontario and soybeans at $11.80 a bushel. Eastern Ontario always has a much stronger basis than the rest of the province and many producers have taken advantage of that. It is difficult to see the corn basis level in Ontario increasing anytime soon based on the high yields being seen in many parts of the province.

Of course, many of us wonder if there is any hope in these markets for much higher prices. It just seems so unlikely, but of course everything is darker before the dawn, but maybe were not even close to dawn yet. Demand for corn remains very good but it is continually overcome by ever-bigger supplies. Soybean demand is insatiable, even more so than corn. So the world will wait I suppose until somebody drops the yield ball. It certainly didn’t happen this past summer in North America.

So as we move ahead much of the focus will be on South America and the crop growing there. I have received pictures this week from Brazil farmers of some beautiful fields. It is unfortunate that in order to get prices higher we have to hope for bad fortune somewhere else. Simply put, it’s South America’s turn. Some way, somehow and somewhere these huge grain supplies have to be drawn down in order for prices to increase. It will happen, but of course nobody knows when or how.