U.S. Midwest Corn & Soybean Yield Trends
U.S. Midwest farmers reduced the total 2020 corn acreage from March intentions by 5 mil to 92 mil acres; soybeans up by just over 300,000 acres to 83.825 mil!
After last year’s early wet spring fiasco that delayed planting, U.S. Midwest farmers have raced off the blocks this year to avoid a repeat, especially in corn. The spring planting was brisk and is well ahead of average as the WCB is ahead of the ECB led by Iowa. One thing to keep in mind moving forward is that corn planting this spring was concentrated into a very narrow window, which could make the crop more vulnerable to adverse weather later in the summer because so much of the crop will be pollinating and filling grain at about the same time from July 10 to July 30th, 2020. Despite some regions in the U.S. Corn Belt being less than ideal and not dry enough, farmers put ‘their strongest foot forward’ and tried to get as many acres planted as possible.
The USDA June Acreage report showed that the U.S. Midwest farmers planted 5 million corn acres less (at 92 mil acres) this year than they had intended in March! That is by far the largest move in either direction since at least 1996. And what’s more, the reduced acreage from corn did not go to soybeans. Soybeans acreage is up by much less than expected and wheat acres are down from March. According to USDA, in the June report, U.S. principal crop acres dropped by 7.2 mil from the March intentions report, and the major reductions were in the Dakotas and Texas.
Despite the reduced acreage, 92 million is still among the top 5 largest corn planted acres of all time. U.S. corn acreage saw reductions vs. March intentions in almost all major states except Wisconsin and Kentucky. North Dakota, expectedly, saw the most reduction of 25%, Arkansas and Mississippi are down by 20% and 23% respectively.
Only a bit over 300,000 acres were added to the March 20/21 U.S. soybean acreage estimate, which came in at 83.8 million acres and below market expectations. But this too will be the 3rd highest planted soybean acreage on record. North Dakota saw a reduction by 9% vs. March, but the Delta states and Indian saw increases in acreage. (Please see charts below)
It's also that time of year for seasonality to kick in as it has worked 30 out of the past 30 years! Futures tend to peak from June 15 – July 15. The real impact of the lower corn acreage is that, in one move, the USDA removed about 800 million bushels (or more) off their starting supply for 20/21. The game has been changed, at least until more is known on yield, which is facing pressure from hot and dry weather. New crop corn and soybean futures have already broken above their trading range.
U.S. soil moisture is below the long-term average
In the latest weekly USDA Crop Progress report, the U.S. soil moisture situation improved week-on-week from the recent rainfall, but the U.S. Climate Prediction Center’s (CPC) 6-10 and 8-14 outlooks signal that those rains may be the most that the Midwest crops receive for some time. The improved soil moisture conditions were mostly in the eastern and southern parts of the Corn Belt and the dryer conditions were in the western and northern parts. Major producers Indiana, Illinois, Michigan (in the eastern Corn Belt), Nebraska and North Dakota (in the western Corn Belt) are the driest states. Minnesota and Iowa are doing very well as of now. (Please see charts below)
NOAA Departure from Normal Precipitation Valid as of July 3rd, 2020
USDA Crop Progress as of June 21st, 2020
According to the USDA Crop Progress report released on June 29th, 2020 U.S. corn crop conditions improved to 73% G-E, 22% fair, 5% P-VP vs. the previous week's 72% G-E, 23% fair, 5% P-VP. This compares to 56% G-E and 12% P-VP this time last year. Recent rains helped the Eastern Belt. Illinois, Michigan, and Ohio, each improved 7-8% G-E, while Indiana was at +5% G-E. Offsetting this some were declines in about 8 other states. (Please see charts below)
The U.S. soybean crop improved +1%wk/wk to 71% G-E compared to 54% this time last year. Most of the states that saw declines last week, improved this week. Emergence in soybeans is seen at 95% vs 89% last week, 80% a year ago and 91% avg. Kansas soybean conditions were off -6% and Nebraska and Wisconsin were each off 2-3%, while Illinois was up +8%, Ohio and Michigan were each up +7%, Indiana was up +5% and North Carolina was up +3%. Most of the states that saw declines last week, improved this week. (Please see charts below)
U.S. Midwest Weather Update as of July 3rd, 2020
CPC as of mid-June was forecasting above normal temperatures for the July, August, September period across most of the contiguous United States (June outlook was for normal temps and above average precipitation) and above normal precipitation was seen for much of the eastern U.S. in the same period. CPC's latest outlook (as of June 30th) for July 2020 suggest that the entire U.S. Corn Belt is likely to be warmer than usual. The first half of the month appears to be trending drier in the central part of the belt. The North and Southeast trend wetter.
Drying in the next 10 days will be most significant in parts of the eastern Midwest and in the southwestern corner of the Corn Belt. Rain in the northern Plains and Canada's Prairies will be good for crops in those areas and perhaps in the upper Midwest as well. Rain will otherwise be greatest in the Delta and southeastern states leaving most areas in between in a net drying mode, despite scattered showers periodically over the next couple of weeks
June was turned hot and dry for the U.S. Midwest, and that trend is continuing into July
June was warmer than normal for a lot of the U.S. Corn Belt. According to weather forecasters BAMWX, the new GFS model as of early-July is coming in quite a bit stronger with the ridge into the second week of July. The ridge into mid July means forecasters and farmers would be on the watch for triple digit heat across the central US into pollination. The triple digit heat looks to threaten areas like Kansas, Missouri, Oklahoma, Texas, Los Angeles, etc. and not yet in Nebraska, Iowa and Illinois. (Please see maps below)
2020 Summer sizzle is on?
For a large part of the U.S., this summer is likely to be a scorcher and June will set the tone for the season. The U.S. Midwest may see warmer, drier weather than normal during the weeks and months to come. The precipitation chances will diminish some as we get further into summer.
The temperature pattern in August will look very similar to July. Most of the scorching heat will take place in July and early August but record-shattering stretches of heat are unlikely. Once the hot weather arrives, the pattern may be tough to shake, and the summer heat could persist well into September.
The U.S. Drought Monitor map continues to see an expansion in the Southern Plains and the ECB is dry. Recent rains helps some regions but the hot and dry forecast for the early part of July could lead to and expansion of dry/drought conditions in the next drought monitor update. (Please see map below)
Funds are positioned with a near record corn short. The lower U.S. June acreage was the first shoe to drop to change the bearish sentiment. Now, the second shoe will be the hot and dry weather in the coming week. If the unfavourable conditions are extended during July, $4.00 corn & $10.00 soys are not out of the question, as a summer 2020 top. $3.62 is key resistance for new crop December corn and $8.90 for new crop November soybeans. Stay tuned, the summer weather is just starting to develop!