Hotter and Drier Outlooks & La Niña Returns Again

Update for July 16th, 2021

The monthly USDA WASDE report was released Monday. New crop ending stocks were raised to 1.432 billion bushels from 1.357 billion a month ago, total production was also raised from 14.990 billion last month to 15.165 billion bushels based on larger planted and harvested acreage. The average national yield was unchanged from June at 179.5 bushels per acre, considerably above the 172-bushel average in 2020. Demand was increased for 2021/22 by 75 million bushels with a 25 million bushel increase in feed and residual, and a rise of 50 million bushels for exports. Corn used for ethanol was left unchanged. The season-average farm price was reduced by a dime to $5.60 per bushel. Brazil’s corn crop was reduced further once again falling from the earlier estimate of 98.5 MMT down to 93.0 MMT- significantly lower than last year’s production of 102 MMT.

Soybean ending stocks were unchanged at 155 million bushels, total new crop soybean production was estimated at 4.4 billion bushels with a national yield average of 50.8 bushels per acre vs 50.2 bushels per acre a year ago. The season-average farm price for 2020/21 soybeans was lowered by $0.20 to $11.05 per bushel.

A slight improvement of 1% in overall GD/EX corn conditions was reported this week bringing the total to 65% vs 69% a year ago. Rains finally moved through some of the driest portions of the Upper Midwest and Plains this week but the outlook for the remainder of July looks to be significantly drier than the first half of the month. What remains to be seen is if the precipitation received so far is enough to carry the U.S. corn crop to trendline yields. Looking at the 6-10 and 8-14 day forecast maps there are no signs of any organized systems developing and the outlooks through the end of the month also show hot temps are expected to return. So, while some areas in much need of rainfall did receive some this week, the drought is far from over and the hotter/drier forecast will rapidly deplete soils of moisture once again. Eastern and southern portions of the U.S. have seen nearly ideal growing conditions all season which helps to support the USDA average corn yield estimate but what is unknown is if these “good” areas are enough to bring the” bad” areas up to and above last year’s national average yield by almost 8 bushels an acre. Yes, a large portion of the dry area’s received some rainfall although most of the precipitation was not heavy enough to change the drought maps long term. Yes, we have more planted corn acres which could translate into more harvested corn acres but will these acres make up any of the shortages that are developing in these dry regions? These are critical pieces of the puzzle that will be debated and remain unanswered for several months. The map shown below from the USDA shows planted corn acres. States shown in blue have increased corn acreage over 2020, the top number represents the total number of corn acres planted (in thousands) in that state and the bottom number is the actual percentage of increase over last year. States shown in red have planted less corn acres than in 2020, the top number still represents the total number of corn acres planted (in thousands) in that state and the bottom number shows the actual percentage of decrease in acres compared to a year ago. The added information printed in red-off to the side of the map - tell us how healthy all of those corn acres are in 3 of the states that have increased corn acreage this year. Keep in mind these regions (along with a few others) are expected to raise enough corn to make up for decreases in corn acres planted in Iowa, Illinois, Nebraska, Kansas – to name just a few – as well as make up for any yield shortfalls that have and will develop during the remainder of the growing season.

Soybean crop conditions were left unchanged in this week’s crop conditions report. The recent drier and hotter weather outlooks are not ideal and may make the anticipated increase in soybean production over last year more difficult to reach. In addition, key canola growing regions here in the U.S. and in Canada are rapidly deteriorating from the extremely high temps and dry conditions that have plagued these areas for many weeks. Not only is the harvest going to be severely reduced but there are also a lot of concerns over the quality of the canola oil that is produced. This places even more importance on soybean production in the coming months here in the U.S and in SAM. Soybean acres in SAM are expected to set a record this season but currently some areas are too wet to be considered optimal growing conditions which is also helping to support soybean prices as is the ongoing strong demand from China.

On July 8th, NOAA issued a La Niña watch which indicates that conditions are suited for development of the weather pattern during the next 6 months. Forecasters with NOAA’s Climate Prediction Center and Columbia University climate research center currently give La Niña a 66% chance of prevailing in November, December and January. This prediction conflicts with 25 other climate models which when averaged reduces the odds of a La Niña weather pattern developing next winter to 34%. However, history tells us that typically La Niña patterns come in pairs and since last winter there was a La Niña pattern in place, this indicates the likelihood of another this winter as well.

Washington State Climatologist Nick Bond explained, “I trust humans informed by models. We like La Niña’s up here for snow. When there are back-to-back La Niña’s, the second is usually weaker than the first one.” These weather patterns help build the snowpack in the west which was 131% of average this spring, a result of last winter’s La Niña. Since the winter of 2010-11 we have had 2 back-to-back La Niña events. If the models influenced by human judgement are correct the ocean will likely stay neutral through the winter which makes seasonal outlooks more difficult to predict and if these forecasts are correct, it could mean further worsening of the drought across the Southwestern U.S.

The weekly Drought Monitor map was updated on Tuesday, it is shown below and is followed by maps that show the crop-by-crop breakdowns and the level of drought involvement with each.

Total expected precipitation through next Friday.