August 10, 2018

Today at noon EST, the USDA released its August Crop Production Report, which included forecasts for the end-of-season US corn and soy yield. This report is a major event for the corn and soy markets every year, and this season was no different.


Today’s report provided a 2018 US corn yield forecast of 178.4 bu/ac, a4.4bu/ac increase(2.5%) from the July WASDE figure (174.0 bu/ac). This revision is relatively on trend with the average change of 4 bu/ac between July and August reports since 2004 (excluding 2012, when the USDA forecast was revised downward by 23 bu/ac).


For soy, which is earlier in its growing season, the production report provided an end-of-year yield forecast of 51.6 bu/ac, a3.1 bu/ac increase(6.0%) from the July WASDE figure (48.5 bu/ac). This revision is larger than the average change of 1.1 bu/ac since 2004.

Why are consensus views so high?

As the 2018 growing season has progressed, early indications suggested another potential record year might occur for corn and soy yields. Phenological calendars were accelerated from mid-May through June given above-average temperatures – particularly warm, humid nights – and an abundance of rainfall. July had very favorable temperatures with a lack of extreme heat, but below average rainfall over many regions coincided with the critical pollination and beginning grain fill stage.

How does this compare to the TellusLabs view?

Our 9 Aug corn outlook was 169.4 bu/ac. That outlook has been consistently below the USDA July forecast of 174.0 bu/ac since launch in July and, as of today, even further below both government and market consensus (which was at 176.2 bu/ac per Reuters yesterday).

Our 9 Aug soy outlook was 49.3 bu/ac. That outlook was above the USDA July forecast of 48.5 bu/ac but is now below the USDA figure and roughly equal to the 49.6 bu/ac the market expected (also per Reuters)

Why is our Kernel outlook below consensus?

Despite the encouraging crop condition reports, our models have considered the weather conditions in much of the Corn Belt to be less than ideal, suggesting that 2018 will not produce a third record corn yield in a row.

Here are a few factors that lead to a downward pressure on our modeled yields in Kernel:

  1. Accelerated crop development resulting in crops maturing too early, reducing the amount of time for corn ears to fully fill out.
  2. Reduced sunlight early in the season from too much rainfall/cloudiness above normal stress degree days
  3. Highly variable rainfall during the pollination stage. Corn can only tolerate about 2-4 days of saturated soils before a complete loss can occur, and some flooded regions are now reflecting the long-term potential for yield losses attributed to flooding rains in June.

However, the sustained upturn in Kernel predicted yields for both corn and soybeans over the past several weeks suggests that recovery from early and mid-season stresses on crops have relaxed a bit.This is largely due to a lack of extreme heat in July with near normal temperatures, and sufficient rainfall to ward off widespread drought. Thus, with a majority of regions having adequate soil moisture, and near normal temperatures, these factors all support a continued upward trend in Kernel.


A word on TellusLabs

TellusLabs is a Boston-based satellite imagery and machine learning company. For the past two years, we have predicted US corn and soy yields within 1% of the USDA and overthree months in advance. Naturally, we are keen to see how the season progresses...

Please reach out with any questions, thoughts, or views!

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