Market Perspectives – May 9, 2024

Chicago Board of Trade Market News



Traders are preparing for Friday’s USDA May crop report. The report is expected to elicit strong reactions as initial 2024/25 world and U.S. balance sheets are included. Private analysts expect that 2023/24 and 2024/25 corn ending stocks will not only hold above 2.0 billion bushels but will grow by 160 million bushels. Wheat and soybean are also expected to show increases for 2024/25 ending stocks. Traders will also be watching to see if the extraordinarily wide gap between Brazilian and USDA estimates of the Brazilian crop will narrow. Traders are also watching what USDA will do with the 2024 Russian wheat crop this early in the season with production pegged at 89-91 MMTs and hot, dry weather persisting in that region of the world. With increases in 2024/25 ending stocks expected and the strong possibility that USDA’s production estimates for South America and Russia remain at high levels, the potential exists for Friday’s USDA reports to be bearish for U.S. futures markets. If there are bullish USDA surprises, they will come from reductions in SA crop sizes.

A weeklong window for U.S. spring seeding (corn, sorghum, and soybeans) is forecast for the Central U.S. with wet weather to return on May 16th. The warm/dry 6-7 days should allow for considerable corn, soybean, sorghum, and spring wheat seeding progress that will ultimately show up in the May 20th Planting Progress report. The forecasts call for wet weather to return to the Central U.S. beyond May 16th and that chances of rain improve for the western Plains states where cool temperatures and some very needed moisture would favor hard red winter wheat yields.

Projecting the size of the U.S. corn crop depends on two components—harvested acreage and yield per acre. The USDA Prospective Planting report released near the end of March provides a starting point in making this important projection.  The report showed that U.S. farmers intend to plant 90 million acres of corn during the 2024 planting season.  Combined with an estimate of the difference between planted and harvested acreage, this can be used to project harvested acreage.  Yield is then the only remaining component needed to project crop size.

A simple trend analysis of U.S. corn yields from 1980 to 2023 produces a model that indicates that U.S. corn yields are increasing at 1.92 bushels per acre per year and projects a 2024 trendline yield of 181.3 bushels per acre. If just the most recent 11 years are used, 2013 through 2023, then the trendline yield is 178.2 bushels per acre and is only increasing at 1.05 bushels per acre per year. This slower rate of yield growth likely reflects a period of below optimal weather rather than an actual reduction is the yield growth deriving from technology. A much more detailed model using time trend, late plantings data, and data on precipitation and temperature for the year 1980 to 2023 (deemed a “Thompson-style” model) can be used to disentangle trend changes from weather impacts. Using this style of model, the time trend is 1.95 bushels per acre per year, but there is a negative 0.35 yield penalty for each percentage point of the national corn crop that is planted after May 20th. This model is also strongly influenced by June and July precipitation and July and August temperatures. The model has a very high explanatory power with an R2 of 98 percent. Using “normal” temperatures and precipitation estimates for the growing season, the expected trend yield of the weather model is 182.1 bushels per acre.