But USDA also opts to increase projected U.S. corn yield to above-trend value
August 12, 2024
Key Observations:
Since Jun 28, we have been expecting the U.S. Department of Agriculture (USDA) to reduce its estimates for U.S. corn acreage and yield in the 2024/25 crop year. Today, USDA cut its projection for U.S. corn planted acreage by 0.8 million acres to 90.7 million acres (–4.1% YoY). However, USDA increased its U.S. corn yield estimate by 2.1 bushels per acre to 183.1 bu/ac. (+3.3% YoY).
The cut to the planted acreage estimate is sensible given recent prices. We continue to believe USDA’s projection for harvested acreage this fall is vulnerable to further downside revisions on price and weather effects. Today, USDA cut its harvested figure by 0.7 million acres to 82.7 million acres (-4.4% YoY).
The bump-up in projected yield is justifiable on crop progress to date. But the revision also increases the risk of disappointment given still-elevated odds for severe weather in the balance of the growing season. USDA’s previous number (181.0 bu/ac) was already a trend value by our calculations. Increasing this projection is a statement of confidence that recent rates of progress will persist. But if yield turns out to be closer to or below trend after all, actual U.S. supply will be at least 175 million bushels lower than the current forecast, all else equal.
The net effect of all revisions today in USDA’s 2024/25 U.S. corn balance is a 24 million bushel cut (-1.1%) to ending stocks. This is a tighter expected balance at the end of the crop year. But the upward revision to yield increases expected supply at the start of the crop year. As a result, USDA lowered its projection for average farm price in 2024/25 by a dime: now $4.20/bu. The Dec-24 CBT corn futures price closed at $4.01/bu today (+6 cents). This is a bearish story becoming less bearish. We still like the risk skew for owning Dec-24 CBT corn futures.
Source: USDA, Blacklight Research. Note: For previous discussions of our view, see Projected corn stocks rely on wobbly stilts (28-Jun-2024) and U.S. crop supply projections start to tick lower (12-Jul-2024). Crop progress data cover 18 states that accounted for 92% of the 2023 crop. As of Aug. 11, USDA rates the condition of 67% of the current crop in these states as good or excellent (59% a year ago), while 10% is rated very poor or poor (13% a year ago).
Comments