Corn Yield May Fall

Implications: USDA may have no choice but to trim its 2008 corn yield because of delayed spring plantings. Less yield per acre and fewer acres could have key implications to supply/demand and ultimately price.

Analysis: Corn Special: Next Friday 05/09/08, USDA will unveil its first 2008/09 supply and demand projections in the May WASDE. The question we ask, could USDA adjust acres planted/harvested and or yield for corn given the less than stellar planting pace? Allendale’s research compared the May estimates vs USDA March Prospective Planting estimates with regards to acreage adjust and concludes, do not anticipate a notable acreage adjustment. However what USDA has done is adjust yield based on planting performance for the May WASDE vs its Outlook Forum estimates (typically held in late Feb/Early March.
                 Dating back to 1998, there have been 6 of 10 years when USDA has made a 1 bu/acre or larger adjustment to yield from the Forum to the May WASDE. The minimum adjustment higher has been 1.1 bu per acre in 2001 and maximum adjustment higher of 2.8 bu per acre in 2004. Since 1998 there has been one time when USDA lowered the corn yield from Forum to May WASDE and its was a very notable 2.5 bu/acre reduction, in 2007. Of the six years only one was reduced, but of equal interest is of the most recent four May WASDE reports, each year, USDA has made reference to adjusting yield based on the pace of planting. 
    Allendale suggest, USDA is likely to continue its adjusting ways next Friday. In the 2008 Feb Outlook Forum USDA estimated yield at 154.9 bu per acre. Most likely yield could be adjusted lower by more than last years 2.5 bpa in 2007 when the planting pace was running 13% behind as of May 4th. 
    Allendale estimates the May 4th, 2008 planting pace to be a minimum of 25% behind the five year ave. The question, would USDA be as so bold to reduce yield per acre by an epic 5 bu? Allendale would be shocked if USDA were to make such a bold move. Allendale's research suggest the trade could have a bullish reaction to a reduce yield in May 9th's WASDE report but foresees USDA not only adjusting overall 2008/09 corn production lower, but most likely adjusting demand (feed, ethanol and export) lower allowing for a notable reduction in projected end stocks vs 2007/08 levels. 
    USDA 2008 Outlook Forum projected end stocks were estimated at a level of 1.243 billion bu and $4.60/bu season average farm price vs Allendale's estimate of 482 mil bu and $6 SAFP based on average weather. Based on the poor rate of plantings in 2008, Allendale estimates end stocks could find reason to be as small as 211 mil bu vs 426 mil bu in 1995. Ironically 1995 also had a unique slow planting pace, but ultimately its crop was decimated by a mid summer drought.
    Conclusion: Allendale's research suggest look for USDA to lower its yield estimate, not planted acreage in the May 9th WASDE. Even though Allendale's supply demand projections are able to support a 62% or greater reduction in 2008/09 end stocks vs 2007/08, we doubt USDA to be as sympathetic.