You know you are in trouble when things are better simply because they aren’t as bad as they were expected to be. Such is the case with the corn market after USDA’s crop condition ratings came in terrible but not quite as bad as expected in the June 25 Crop Progress report. As can be seen at right, this week’s good/excellent rating percentage of 56% is 7% lower than on week ago, 12% lower than last year’s 68% for the same week. It is also 10% lower than the average of the past 10 years and even 1% lower than the crop rating for this week in 2002, our worst year since 1990.
But it wasn’t quite as bad as the market expected and corn futures are all marginally higher in electronic trading this afternoon and evening.
Still, this corn crop is in trouble in some important areas. The most serious is Indiana where the share rated good or excellent fell from 37% last week to 27% this week. Perhaps more important, the share rated poor or very poor grew from 24% last week to 36% this week. Illinois, the number 2 corn state behind only Iowa, is the other state of concern as its share in the good/excellent categories dropped 15% last week to only 37%. Illinois’s porr/very poor share jumped from 13% to 22% this week. Nationally, 16% of acres were rated poor or very poor this week compared to 9 both last week and one year ago.
The western Cornbelt, much of which received some amount of rain last week, still has a large majority of acres rated good or excellent — at least for now. Minnesota, about which we were very concerned when planting started, is the garden spot with 83% of acres in the top two categories. It is followed by North Dakota (91% good/excellent), South Dakota (71%), Iowa (68%) and Nebraska (60%). Missouri and Kansa are the trouble states in the west at 34% and 40% Good/Excellent, respectively.
An things are no better for soybeans. This week’s 53% good/excellent share is the lowest for this week since 1988 when the last great Midwestern drought has only 17% of soybean acres so rated for this week. Since our “worst” in the chart goes back only to 1990, the 1988 data do not appear there. This week’s 53% compares to 65% last year and a 10-year average of 64.5% good/ excellent in week 25. It is 3% lower than last week’s figure. The trouble spots for soybeans are, as expected, virtually the same as those for corn. Good/excellent shares dropped shrply in Illinois (-12% to 35% for the week), Indiana (-8% to 24%), and Michigan (-10% to 49%). Good/excellent shares remained above 60% in Iowa, Minnesota, the Dakotas and Mississippi. AS with corn, Missouri is the sore spot in the west with only 26% of acres rated good/excellent and 35% rated poor/very poor.
But what does all of this mean for potential yields? The answer is “Not much” if one looks at the historical relationships. The chart at the top of page 2 shows final annual yields as well as week 25 and week 26 good/excellent crop percentages. We present two weeks simply because this crop is farther along than normal and comparing to week 26 may be more appropriate.
There are clearly years with poor ratings and good yields (1992, 2005, 2008) and with good ratings and poor yields (1991, 1997). The correlations are abysmal with week 25’s correlation to final yield being 0.3236 and week 26’s being 0.2879. 1992 and 1993 are the only two other years that really compare to this year at this time and one of them saw a yield roughly 11 bushels higher than trend while the other saw a yield over 20 bushels lower than trend. The latter, 1993, was of course a year of flooding and extremely wet conditions on millions of acres that did not flood. Do we really compare it to a year of dry, hot conditions?
The story for soybeans is much the same. The correlations here are a bit better (0.3963 for week 25, 0.33236 for week 26) but nothing close that anything we would want to take a risk on.
Obviously — Many things could yet change