2016 Crop Marketing Considerations

As we all know there are 2 components of US corn and soybean production, total planted, and then harvested acreage, as well as yields of each. During the last week of February, USDA held its annual Outlook Forum and presented the Grains and Oilseeds Outlook. USDA is projecting a 2.2% reduction in planted acres (5.5 million) for eight major crops. USDA projects 2.3 million more acres of corn will be planted in the US. Annually, USDA conducts a planting intentions survey, Prospective Plantings, which is released March 31. The other component of total corn production will be the average yield. Current yield projections are usually based on trend line yields. Some yield projection also include a weather model; USDA includes a weather model. USDA projected a 168 bu/acre US corn yield at its recent Outlook Forum.

U of IL ag economists Good and Irwin have taken US average corn yields from 1960-2015 to develop a yield trend line as well. Their 2016 corn trend yield estimate is 164.2 bushels/acre. However they indicate that a weather bias, think 1983, 1988 and 2012, slightly underestimates the trend line. This underestimation is 2 bu/acre leading to a trend line yield of 166.2 bu/acre. The difference between the USDA and the U of Illinois models is that they each use a different time series to calculate the trend line. However there is only 1.8 bushels/acre difference.

We also know that corn yields vary following a major El Nino event, +11 bushels to -28.6 bu/acre compared to the trend line. The US corn yield in a year after El Nino was equal to or above the trend line 58% of the time. The U of IL analysis indicates that when El Nino was as strong as that during 2015, the realized yield averaged -4.8 bushels/acre from the trend line. That average is misleading since only 3 years are included in the calculation and 1 was 23 bushels/acre below the trend line. Irwin and Good estimate that there is a 2/3 chance that US corn yields will follow trend line yield.

USDA also forecast soybean planted acreage at the Outlook Forum down 0.2 million acres, -0.2%, from 2015. USDA also projected 2016 soybean yields at 46.7 bushels/acre down from the 48 bushels per acre in 2015 of 48 bushels. Irwin and Good also reviews soybean yield data for 1960-2015 to develop a trend line yield. Their trend line yield for 2016 is 45 bushels but a few years of weather variation, 6 years, cause a downward bias to the trend line, but it is small., 0.2 bushels/acre. Adjusting for the bias gives a 2016 soybean yield projection of 45.2 bushels of soybeans, just 1.5 bushels less than the USDA’s estimate.

As with corn, Irwin and Good looked a the effect of El Nino on soybean yields. They found 3 years similar to the El Nino we have just experienced. Their data suggest that we would expect yields on average 1.2 bushels below trend line but the range of the outcomes is +1.3 to -5.3bushels from trend line. And of course there are only 3 years to make a comparison. The whole The whole data set had a range of yields of +2.4 to -6.6 bushels from trend line. Irwin and Good calculate that soybeans yields 2/3 of the time follow the trend line following a strong El Nino.