Corn and Soybean Harvest Progress Update
The USDA’s most current crop progress report on Tuesday, November 12, showed an improving soybean harvest pace and a corn crop that continues to lag near the bottom of the five-year and historical averages.
While the U.S. soybean crop has realized positive momentum over the last three weeks, at 66% complete, we believe that harvest pace of the U.S. corn crop could be reaching a troublesome inflection point.
Below, we look at the reported soybean and corn harvest pace and how the USDA historically treats both yield and harvested acres in the January WASDE report.
Corn progress update
Data from the USDA’s November 12 Crop Progress report shows that 66% of U.S. corn has been harvested. This figure is well behind the five-year average of 85% but it’s also the third slowest pace on record, with only 2009 and 1992 being slower. At FBN, we believe that while the national corn harvest pace is exceptionally slow the state level information provides a more sobering view.
At 13%, North Dakota’s harvest pace is the second slowest on record; 2009 was the slowest. At 39% harvested, the corn harvest pace in South Dakota is the third slowest on record. The harvest pace in Iowa and Minnesota, 64% and 63%, respectively, are the fourth slowest pace. In the eastern Corn Belt, the harvest pace is also close to historically slow levels. At 71%, the harvest in Illinois is the third slowest on record. The harvest pace in Indiana, Ohio, Missouri and Nebraska are in the bottom 25%.
Soybean progress update
Over the last three weeks, the soybean harvest pace has accelerated and, unlike corn, is much closer to historical averages. Nationally, the USDA reported that as of November 10, 85% of the soybeans had been harvested. This compares with 87% for the same week in 2018 and the five-year average of 92%. Historically, the reported 85% is in the bottom 30% for the week.
At the state level, many of the key soybean producing states are marginally within 5%-6% behind the five-year averages and close to completion. Despite the recent progress, the harvest pace in many key producing states are toward the lower end of the historical range. The reported harvest pace in Wisconsin is the second slowest on record. At 72% harvested, Missouri is the furthest behind pace. At 91% and 88%, respectively, both Minnesota and Iowa’s harvest pace are the second slowest harvest since 1981. At 87%, the harvest pace in Illinois is the third slowest on record.
Potential USDA actions toward yield and harvested acres in the January WASDE
Given the lethargic corn development and harvest pace of the 2019/20 corn crop, at FBN we are shifting our attention to how the USDA may treat both harvested acres and yields in the January WASDE reports. Because the November WASDE represents the USDA’s final objective yield survey for the marketing year, we believe that when the government presents their final production figures in the January WASDE, that upside risks for corn and soybean may remain. Historically, from the USDA November report to the January report, the government has a propensity to adjust yield and harvested acres.
Since the year 2000, the USDA has lowered their yield objective from the November to January report 12 times, or 60%. During these 12 times, the USDA has lowered the national corn yield objective by an average of 1.36 BPA. The largest reduction was last year’s 2018/19 crop, when the government lowered the national yields in the January report by 2.5 BPA. The smallest was a 0.5 BPA adjustment. Over the same time period, the USDA has lowered the harvested acres 50% of the time, with an average reduction of 430,000 acres. The largest reduction since 2000 was in the 2002/03 crop year when the USDA lowered harvested acres in the January report by 1.2 million acres (MA). Interestingly, the USDA has lowered harvested acres in the January WASDE for each of the past three years.
In years where the corn harvest was at the bottom of the historical range — 1992, 2009 and 2008, the slowest being in 1992 — the USDA added back yield and harvested acres in the January report. In crop years 1992 and 2009, the USDA added back to the national yield objective an average of over 2 BPA in the January WASDE. In 2008, the government added back 0.1 BPA to the national yield objective. Harvested acres in crop years 2008 and 2009 also rose from November to January, by 400,000 acres and 300,000, respectfully. 1992 harvest acres in the January report were unchanged from November.
Treatment by the USDA from the November to January WASDE assumes a more muted supply adjustment scenario. Since 2000, the USDA has lowered the national yield objective nine times, 45% of the time, from November to January WASDE. The average adjustment is -0.33 BPA. The largest negative yield adjustment was for the 2018/19 crop year, where the USDA lowered the national yield objective by 0.5 BPA. Since 2000, the USDA has lowered harvested acres 11 times with an average reduction of 350,000 acres. Aside from 2009, the other five slowest harvest years were in the early-mid 1980s. Given that the USDA is a different entity with a different staff than the 1980s, we focus on the treatment of the 2009/10 marketing year. 2009 was the slowest harvest pace on record. In the January WASDE, the government raised the national soybean yield objective from November by 0.7 BPA and lowered harvest acres by 200,000 acres.
Looking at the current harvest pace for the 2019/20 corn and soybean crops, both are slow and behind the averages. The pace of the corn harvest, 66% complete, is the third slowest on record, while the pace of the soybean harvest is in the lower 25%. With the USDA having completed their final objective yield survey for the 2019/20 crop year in the November WASDE, the January report possesses a large amount of weight in determining the size of both crops. The January report is critical because this is where government presents their final yield and harvested acres figures. While both of those numbers are subject to revision, most market participants adopt the January data as final figures.
Examining the behavior of the USDA’s treatment of the yield and harvested acres from the November to January report, we believe that it is probable that the USDA could be underestimating the size of the 2019/20 corn crop. To support this theory, we use 1992, 2008 and 2009 as benchmark years for corn. Despite the reported slow harvest in mid-November, the USDA raised both the national yield objective and harvested acres in the January WASDE. Understanding the USDA’s treatment of soybean yield and harvested acres data, it is probable that the government lowers both figures in the January WASDE.
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