Morgan Stanley agriculture analyst Bennett Meier hammers the USDA's 2013 corn crop outlook today, saying the agency's late-winter corn call is almost always wrong.
Given asymmetric yield risk, USDA’s first forecasts are overly optimistic in our view. USDA based its 163.6 bu/acre corn yield forecast on a weather-adjusted trend model, assuming “normal” early-season plantings and June/July weather. Good weather during the growing season could produce such an outcome, but we view the USDA yield outlook as more of a bull case than a base case.
The USDA has a history of being too optimistic early in the marketing year, with final yields coming in below initial estimates in 5 of the past 6 years. Moreover, the ongoing drought in the US plains presents significant downside risk in the event of a dry summer.
Meier is calling for yields of 155 bushels per acre and 13.8 billion total bushels of production, compared with the USDA's 163.6 bu/acre and 14.5 billion figure.
As it happens, Maier's projections still represent an improvement over last year's figures of 123.4 yield and 10.7 billion bushels of production.
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