USDA's surprise corn ratings suggest average start to season -Braun

This year’s initial rating is well above last year’s first score of 59%, but below the 2014-2018 average of 73%.

  
Image used for illustrative purpose. Corn Growing On Farm Against Sky.

Image used for illustrative purpose. Corn Growing On Farm Against Sky.

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FORT COLLINS, Colo.- U.S. corn conditions on Tuesday were neither above nor below market expectations because analysts were not expecting to see those numbers at all, but the initial prognosis is relatively positive.

The U.S. Department of Agriculture’s statistics service (NASS) on Tuesday rated 70% of the corn crop in good or excellent condition as of Sunday. That is somewhat middle-of-the-road compared with most prior years, but it does suggest that good yields may be on the way if summer weather is supportive.

This year’s initial rating is well above last year’s first score of 59%, but below the 2014-2018 average of 73%. 

NASS usually lists the figures that will be published the next week at the end of each report, and corn conditions were not listed in last week’s report. However, a NASS representative immediately after Tuesday’s release confirmed that the notification to expect corn conditions this week was accidentally omitted last week.

USDA aims to publish initial condition scores on the week when emergence reaches or exceeds 50%, but in the past, those were often published the week after emergence passed 45% or 50%. Emergence as of May 17 was 43%, so it was likely unclear to market participants that this number would appear Tuesday, especially without the notice.

Some 64% of the corn had emerged by May 24, which is just above the 2014-2018 average of 63%. Only 28% was emerged on the same date a year ago due to record slow planting, and that brought the recent five-year average emergence for the date to 58%.

The condition observations, taken primarily by county extension agents based on what they are seeing and hearing, reflect the portion of crop that has emerged. Unplanted fields, fields needing replanting and fields where conditions prevented farmers from planting are not considered.

This week’s initial condition score was offered on a relatively low amount of emerged corn at 64%. That is above 62% in the prior year, but between 2012 and 2018, emergence averaged 75% with a low of 72% when the initial ratings were published.

YIELD IMPLICATIONS

Condition scores are not everyone’s cup of tea, and they are sometimes criticized for being too subjective, arbitrary or even meaningless. But most analysts and traders follow them anyway.

Initial corn conditions of 70% good-to-excellent have historically been a dividing line between excellent and average yield potential. 

There is not a lot of downside to yield potential when early conditions are above 70%. However, initial conditions of 77% in 2012 were a poor precursor to the drought destruction to come, but that example was very much an exception, not a rule.

Early conditions below 70% have never produced well-above-trend corn yields. The best example in that category was 2017 when the initial score was 65%. National yield ended up at a record 176.6 bushels per acre, but that was only 3% above the long-term trend. Some of the best performances, like 2004, had departures of 10% above trend.

There is a little more flexibility at the state level as very low early ratings are not always a death sentence. For example, No. 2 corn state Illinois had only 52% of its corn in good or excellent state at the end of May 2017, but the crop went on to yield 201 bushels per acre, record at the time.

CURRENT CONDITIONS

As of Sunday, only 55% of Illinois corn was rated good or excellent, up from 47% in early June last year, but well below 2018’s initial rating of 83%. The lower rating could stem from excessive rains earlier this month that may require some farmers to replant.

Other top corn states are in much better shape. Iowa and Minnesota corn was rated 81% good or excellent as of Sunday, while Nebraska was slightly better at 82%.

Concerns are more prevalent in the east. Only 54% of corn in Ohio was good or excellent, and the state leads in the poor-to-very poor category at 14%. One-third of Ohio’s crop was emerged as of Sunday, so the numbers could shift in the coming weeks.

North Dakota likely had the most problems with corn planting as fields in some parts of the state have been extremely wet since last fall. Some 67% of corn there was considered good or excellent as of Sunday, though only 12% had emerged.

North Dakota’s corn planting progress jumped to 54% on Sunday from 20% in the prior week. But based on USDA’s procedures, planting progress numbers can be artificially inflated if farmers have switched a corn field to another crop or if they completely abandoned plans to plant the field. 

North Dakota is one of the very few states that initially intended to plant fewer corn acres in 2020 than in 2019.

(Editing by Leslie Adler) ((karen.braun@thomsonreuters.com; +1 (312) 408-8059; Reuters Messaging: karen.braun.thomsonreuters.net@reuters.com; Twitter: @kannbwx))