Wet weather muddies corn outlook

by Ron Sterk
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Weather has taken an early toll on U.S. agriculture and commodity prices already this growing season. Corn, spring wheat, soybeans, sugar beets, oats and other crops are being planted late. Some late-planted and flooded acreage has been abandoned in favor of insurance payouts. But the majority of the growing season lies ahead and the need for an ideal summer and a late frost is critical, especially for corn and spring wheat.

“We’re playing with fire,” said David Salmon, president of Weather Derivatives, an agricultural and energy weather service in Belton, Mo. He noted the National Weather Service issued a “neutral” forecast for the summer, calling for temperatures to be “not hot” and for rainfall to be “normal.”

“I think the growing season will be moist and cool,” Mr. Salmon said. “If we have a cool summer, the crop (corn in the eastern Corn Belt) may never finish.”

Cool, wet weather all spring and flooding across the Upper Midwest delayed planting and pushed prices for hard red spring wheat futures traded in Minneapolis to their highest level since 2008, with nearby July topping at $10.78 a bu on May 26 and closing at $10.56¼ on May 27. As of May 29, spring wheat planting was only 68% completed in the six major growing states compared with 95% as the 2006-10 average for the date, the U.S. Department of Agriculture said in its latest Crop Progress report.

Cash prices for durum, also mostly a spring-grown crop, surged $2 to $13.70 a bu in Minneapolis two weeks ago for the same reasons as hard red spring wheat. The price was the highest since September 2008. Canadian milling durum jumped $2.75, to the equivalent of $15 a bu in Thunder Bay, Ont., the past two weeks.

Futures prices for most other grains and oilseeds, including Kansas City hard red winter wheat and Chicago soft red winter wheat, soybeans, rice and oats, peaked in February, most at the highest levels since 2008. The exception was corn futures, often the market leader, which set an all-time high April 11 of $7.88¾ a bu basis the July contract.

Farmers across the Corn Belt have been planting corn earlier and earlier for many years. Last year was one of the earliest on record, followed by nearly ideal growing and harvesting conditions. In its March 31 Prospective Plantings report the U.S.D.A. said farmers indicated they would plant 92.2 million acres of corn, up 4 million acres, or 4.5%, from 2010. Acres were attracted to corn as strong demand from the export, feed and especially ethanol sectors pulled old crop stocks to the lowest level in 15 years.

Corn planting in the 18 major growing states was 86% completed as of May 29, the U.S.D.A. said, compared with 95% as the 2006-10 average for the date, but cool and excessively wet conditions in the Upper Midwest and eastern Corn Belt have pushed corn planting back several weeks in some states.

A recent wire service poll showed analysts forecast as many as 1.85 million acres of corn may go unplanted or be switched to other crops because of delayed planting or weather-related losses. That would take planted area down to about 90.35 million acres. Using U.S.D.A.’s abandonment percentage of 7.7% of planted area, harvested area then would total about 83.4 million acres, up 2.5% from 81.4 million acres in 2010. And, using the U.S.D.A. projected yield of 158.7 bus an acre, 2011 U.S. corn production would be 13,234 million bus, 121 million bus less than the U.S.D.A.’s projected 2011-12 total use of 13,355 million bus. Use is expected to exceed production by an estimated 1,003 million bus in this year (2010-11), but beginning stocks were 1,708 million bus compared with a projected 730 million bus at the start of 2011-12 on Sept. 1, 2011.

“There’s going to be more than a 2% decline in corn acres,” Mr. Salmon suggested, noting U.S.D.A. numbers for slow progress in Ohio at 19% planted as of May 29 (93% as the 2006-10 average), Indiana at 59% (87%), Michigan at 67% (92%), Wisconsin at 80% (92% average), Minnesota at 88% (98%) and North Dakota at 74% (91%).

Also important is the effect of late planting on yield loss, with yield estimated to drop about 1 bu a day after optimum planting dates, which vary by location.

Mr. Salmon estimated the average U.S. corn yield has dropped 2 bus an acre from the U.S.D.A.’s projection. But, he also noted yield still has time to recover, although quality may suffer.

“Right behind acreage loss the quality issue may be bigger for corn than the yield issue,” Mr. Salmon said. “A cool, moist growing season is negative for late planted corn.”

In 2009 a considerable amount of late planted corn never matured or dried down sufficiently due to a cool, moist growing season.

Late planting also will push the key pollination period for corn further into the hotter, drier days of summer, but much of that may be offset by a cool, moist growing season, Mr. Salmon suggested.

The trade will get planted area numbers in the U.S.D.A.’s June 30 Acreage report, the first survey-based production estimate for spring wheat on July 12 and for corn and soybeans on Aug. 11.

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