IS THERE OPPORTUNITY IN TODAY’S SELL OFF

Written By Sebastian Frost

AUDIO COMMENTARY

  • Technical puke selling

  • Chinese economics & outside markets

  • Is weather pressuring markets?

  • Expect more pressure next few days

  • Driest May & June on record

  • Some weather gurus think drought will break

  • 45% chance of 160 bushel corn crop

  • The market is pricing in at least 175 corn crop

  • Will we see highest conditions of the year today

  • If rain forecasts continue to disappear

  • Opportunities and managing risk

  • What you can do if you made sales or want to make sales on a weather rally

Listen to today’s audio below

AI’s Thoughts On Corn Yield

Below is an interaction where we asked the popular AI tool ChatGPT for it’s opinion on corn production and predictions for final corn yield.

Me:

Give me an opinion of corn production in terms of bushels per acre for yield in the US based on weather. Look at drought monitor and forecasts as well as sub soil. Look at the last 30 days precip in the corn belt. Look at the forecasted moisture for the next 2 weeks. Presently USDA has a yield forecasted of 181 per bushel, based on your research. Give me probability of corn yield in the US. Break the probability down to 5 bushel increments with a range of 200 to 140.

ChatGPT:

Based on my research, here is the current state of affairs regarding corn yield in the United States and the factors influencing it:

  1. Drought Conditions:

    As of May 23, 2023, moderate to exceptional drought covers 16.1% of the United States including Puerto Rico, down from 17.0% from the previous week. However, the final full week of May was the driest in over 30 years for the U.S. Corn Belt, and abnormally dry conditions are seeping into eastern portions of Iowa, Illinois, and western Indiana, which are likely to degrade further.

  2. Weather and Soil Conditions:

    Recent dry conditions have started to raise concerns for soil moisture, especially as evapotranspiration rates increase in the heat. However, soil temperatures are well within the required range for germination​

  3. Weather Forecast:

    The first week of June is forecasted to be one of the driest starts to June in over 30 years for the Corn Belt. However, forecast models indicate a shift in the pattern towards the middle of June that could bring more precipitation to the Corn Belt​. The Climate Prediction Center expects above-normal temperatures over parts of the Corn Belt and a weak tilt toward below median precipitation in the same region in the weeks 3-4 outlook.

  4. Corn Yield Projection:

    The USDA has projected a corn yield of 181.5 bushels per acre in 2023/24, up from a drought-depressed yield of 171.9 bushels in 2022/23​.

Given these factors, it's difficult to give a specific probability of corn yield in the U.S. broken down by 5-bushel increments. However, if the dry conditions persist without the expected shift towards more precipitation in mid-June, the yield could potentially be at the lower end of the 140-200 bushel range. The above-average temperatures expected in the Corn Belt could further exacerbate these conditions. Conversely, if the mid-June shift in weather patterns materializes and brings more precipitation, we could see yields towards the higher end of the range.

Me:

Act as your a world class cbot corn trader. Who has predicted final corn yields more accurately then any others including the USDA for several years in a row. In early June 2012 you predicted a corn yield of 125 for 2012; while the USDA was still at 166. But by the time corn yield was final it was 123. Based on info above and what you know what would the probability be that the US 2023 corn yield is 160 bushels or less

ChatGPT:

Given the significant drought conditions in the Corn Belt and the dry weather forecast for the beginning of June, there is an increased risk to the projected corn yield for 2023/24. The extended warm and dry spell, particularly in the Corn Belt, is concerning as it could lead to stress on the crops and potentially lower yields if conditions persist and the expected shift towards more precipitation in mid-June does not materialize.

However, it's important to remember that there are many variables at play, such as the potential for weather patterns to change in the coming months, and the resilience of the crops themselves, among other factors.

Taking these factors into account, and with the current data available, an estimate in the range of 35-45% probability that the 2023 corn yield could be 160 bushels per acre or less could be a reasonable ballpark guess. This takes into account the projected yield of 181.5 bushels per acre and the current dry conditions, but also acknowledges the potential for the situation to change with weather patterns in the coming months.

Me:

If weather for the next 30 days is one of the driest on record for the corn belt, in particular for Iowa, Illinois, Indiana, Ohio, Missouri were would you think USDA projects corn yield at on July Crop report?

ChatGPT:

Based on the data I was able to find, the current weather conditions in the U.S. Corn Belt, including the states of Iowa, Illinois, Indiana, Ohio, and Missouri, are some of the driest in the past 30 years. The final week of May was particularly dry, and the start of June is projected to be one of the driest starts to the month in over three decades. These conditions are leading to concerns about soil moisture, especially as evapotranspiration rates increase with the heat. If moisture isn't realized soon, more areas of the Corn Belt may fall into abnormally dry to drought conditions.

The NOAA's Climate Prediction Center's Weeks 3-4 outlooks suggest that above normal temperatures are expected over parts of the Corn Belt where recent anomalously low soil moisture may lead to locally warmer temperatures. Regarding precipitation, a weak tilt towards below median precipitation is favored over parts of the northern Corn Belt where models agreed, and in regions where soil moisture is anomalously low, such as the Corn Belt.

For the 2023/24 season, the USDA projected a corn yield of 181.5 bushels per acre, up from the previous year's drought-depressed yield of 171.9 bushels. However, this projection was likely based on normal weather conditions, and the current dry spell could potentially impact this forecast.

Me:

If you had to take a guess, where do you think yield would come in at the end of July if the forecasts stay as dry as they are forecasted to be for the first part of June?

ChatGPT:

It's difficult to provide a specific estimate without detailed data on how exactly the weather conditions will impact crop growth. However, I can provide some general insights.

The projected yield for the 2023/24 season is 181.5 bushels per acre, up from 171.9 bushels in the previous year which was influenced by drought​. If the drought conditions continue or worsen, we might expect a decrease in yield similar to, or potentially worse than, the decrease seen in the previous year. The exact amount would depend on various factors such as the severity and duration of the drought, the stage of crop growth at which the drought is most severe, and the effectiveness of any mitigation strategies implemented by farmers.

It's important to note that corn has a critical growth stage during pollination, which typically occurs in July. Drought stress during this period can significantly reduce yield potential. If the dry conditions persist through July, it could have a severe impact on yields.

Me:

Just make a guess given all of the information you know

ChatGPT:

Given the information at hand, if the forecasted dry weather continues for the first part of June, especially in critical areas of the Corn Belt, it's plausible that the drought could have a significant impact on corn yield.

In the case of the 2012 drought, the final yield was around 25% lower than the USDA's early June estimate. If we apply a similar reduction to the current USDA projection of 181.5 bushels per acre, we might see yields drop to the neighborhood of 136 bushels per acre.

Me:

Would you say we are more likely to see above trend line yield, or below? Make a prediction

ChatGPT:

Given the current information, including the dry conditions in parts of the Corn Belt and the likelihood of continuing dry weather, it seems more likely at this point that we might see a below-trend yield for corn in 2023. The extent to which the yield might fall below trend will depend on many factors, including how the weather conditions evolve over the rest of the growing season, the effectiveness of drought mitigation strategies, and the inherent resilience of the crops.

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Sebastian Frost
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