The U.S. corn and soybean crops are in great shape early in the growing season, and while there’s still plenty of time for luck to change, this year’s crop is already in good company.
The U.S. Department of Agriculture estimated Monday that 72% of U.S. soybeans are in good or excellent health, in its first assessment of the season. This figure is in line with market expectations and above the 10-year average of initial soybean assessments of 68%.
This came a week after initial U.S. corn conditions reached 75% good or excellent (GE), which is well above the market forecast of 70% and the 10-year average of 71 %.
Only two other years in the last two decades have had a better combination of initial corn and soybean conditions. In 2014, corn was 76% GE and soybeans were 74%, and 2018 started with corn at 79% GE and soybeans at 75%.
Since 2005, initial corn and soybean conditions have both been above average for seven years. Both corn and soybean final yields have been above USDA benchmark levels in all but one year, 2022.
The 2022 harvest was marked by severe drought across the Plains, with Nebraska, South Dakota and Kansas reporting their worst corn and soybean yields since 2012. However, production was respectable, with major producers in the Iowa, Illinois and neighboring states performed well.
Good crop health this year may not guarantee a yield above the USDA trend line, as that mark has been unbeatable for corn since 2018. The USDA trend yield for corn has been particularly questionable over the past two years, with the trend several bushels above the previous record.
The 2023 U.S. corn crop hit a record 177.3 bushels per acre (bpa), although that figure is 2.3% below the USDA trend line, representing the shortest deficit most important since 2020.
The U.S. soybean yield has been below trend the past two seasons but has been above trend the previous two seasons, and the USDA soybean trend yields for 2023 and 2024 (52 bpa) are extremely close to the 2016 record (51.9).
Aside from the trend line controversy, USDA crop health notes suggest both crops are poised for success, barring extreme weather events, including prolonged heat, drought or a significant derecho like the one observed in 2020.
Linear regression modeling is common in yield forecasting because it directly assesses the extent to which a dependent variable like yield can be explained by one or more independent variables – in this case, conditions.
Using week 23 corn conditions to predict final yield deviation from trend yields an R-square of 0.11, meaning only 11% of the yield variation can be explained by conditions this week.
The R-square reaches 0.73 for weeks 29 and 30 (late July), suggesting that corn conditions have a maximum correlation with actual yield spreads at the end of July, even when including other factors such as weather conditions in July or August would improve the reliability of the model.
The same analysis for soybean yield deviations from trend gives a much worse R-squared, which remains below 0.5 through the end of August. It is not uncommon for high soybean yields to be associated with mid-season conditions near 60% GE. Karen Braun is a market analyst for Reuters. The opinions expressed above are his own.
