Having an ugly corn crop is one thing. But having it at the same time other states are cruising along at ‘good’ or ‘excellent crop ratings?’ Well, that just hurts. But that’s the state of affairs right now for several Indiana corn farmers who experienced devastating rains forcing replanting decisions that have turned some fields into multi-colored, uneven train wrecks.

“In Indiana we’ve got the worst looking corn crop in the United States of America, at least among the 18 major states that report to USDA,” said Purdue economist Chris Hurt at the conclusion of last week’s Farm Management tour in Delphi, Ind. “Forty-five percent of the crop is rated good or excellent, which leaves 55% in the bottom three categories, and that doesn’t feel good.”

Things aren’t exactly perfect in other states. The Dakotas are dry and Ohio is also hurting; Illinois has its ups and downs. But the western Corn Belt looks pretty good and Minnesota is a garden state right now with 81% of its corn crop rated good or excellent.

All of which means Indiana farmers could be the odd men out if they suffer both poor yields and poor prices this fall.

Crop juggernauts
Hurt noted that the Dakotas, currently suffering drought, have become corn and soybean juggernauts.

“If you put North and South Dakota together for soy acreage they have 13 million acres; Illinois is the largest single state at around 10 million,” he says. “North and South Dakota together in corn would be the fourth largest corn state. So, if droughty conditions do lower yield, I think there’s still a chance weather could be a factor in the market.”

Meanwhile Hurt speculated that if Indiana’s crop woes continue, yields could fall to 159 bu. per acre, or 14 bu. per acre lower than trend.

Exceptions to the rule
USDA has been doing weekly crop ratings since 1986. In those years, Indiana has had five years when it has experienced similar or worse corn crop ratings at this point in the growing season. “You can probably rule out years like 1988 and 2012 when we had drought,” says Hurt. The farm tour had concluded earlier with a gully washer at the last farm visit.

The good news is that in 1990 the state had low ratings in mid-June and still recovered to produce above trend yields. In 1996 they also had terrible planting conditions but ended up just 7% off trend yields. In the third example the state recovered to make trend yields, so there’s hope.

Nationally the crop ratings are slightly poorer than normal for this time of year. That projects to about a 2 bu. reduction in corn yield. The market interprets the next 10 days as bearish, because there’s cool, wet weather coming, and that, generally speaking, makes grain.

Nationally the soybean crop is about average. The market says it expects to add to bean yields over the next 10 days to two weeks, says Hurt, who predicts this upcoming Friday USDA report will show even more soybean acres and fewer corn acres. “I’m plugging in a million and a half more soybean acres,” he says.

When you plug those numbers in, even with average corn yields, he expects corn carryover numbers to come down.

“When there’s a lot of carryover the buyers don’t have to bid up,” Hurt says. “We have turned the corner on corn (carryout). We’re going to be bringing that number down from 2.2 billion bushels to below 2 billion bu., maybe 1.85 -1.9 billion bushels of corn. That causes me to say price of corn will be higher for 2017 corn than it was in 2016. I have corn at $3.70, based on where we are today on a national basis, and factoring in slightly lower national average forecast yields.”

Will we get an opportunity to sell new crop above $4? “We’re facing a big battle in the export sector, a strong dollar which makes it harder for the U.S. farmer, and competition from South America,” says Hurt. “Brazil’s political scandal lowers their currency which makes it easier for Brazilian farmers to sell into the world market. Oil is down to bearish levels, which is a signal that traders and investors want you to be short on commodities. But that can turn on a dime.”

Another tight year
We’ve had three recent crops with really tight margins. We’ve driven down some costs, driven down some cash rents, and cut down on capital investments, noted Hurt. “The belt was so tight on our family living expenses we wanted to make sure our kids still came home from school,” he said. For Indiana, projecting a 10-bu. per acre hit times $3.70 per bu. translates to another tight year.

“Our budgets show 2017 best guess margins are about as tight as they were in 2015 when we had 150 bu. corn, and way too much rain.

“It’s not just one or two years getting by with financial reserves – it’s four years in a row and that’s where we begin to say ouch, this is reality. So if you haven’t made adjustments you’d better start. The outlook is pretty discouraging right now.”