Fall rain slows Midwest harvest
September 28, 2010
KANSAS CITY — In August it was Russia’s ban on grain exports that sent prices, mainly wheat futures, soaring. In September it appears to be falling U.S. corn yields, with harvest hampered by excessive moisture in the Midwest, and a freeze across much of Canada’s Prairie Provinces that have stimulated prices.
Last week’s markets also were boosted by dryness in some South American soybean growing areas and a freeze in parts of China’s corn growing region, added to the well-established severe drought across parts of the former Soviet Union. Europe has had problems, as well, ranging from too wet to too dry, and dryness in Australia was threatening what was forecast to be the largest wheat crop in five years. While not the severity of 2008 when low stock levels and global weather issues sent grain and oilseed prices to record highs, the numerous and widespread adversities certainly have spurred global demand for U.S. supply.
Domestic and global weather concerns pushed corn futures prices to near or above $5 a bu through September 2011 and soybeans to near or above $11 for the same period. Wheat futures were mostly in the mid-$7 a bu and above range. All were at levels few in the trade were expecting just a couple of months ago. Corn and soybean values were especially surprising given prices traditionally succumb to harvest pressure in September, and record large U.S. crops were forecast.
Domestic end users of grain and oilseed products, such as corn meal and soy flour, who were waiting to extend coverage when prices declined in the fall, were surprised to see higher values in the case of corn meal and steady to firm prices for soy flour. Many have chosen to delay adding coverage and are buying month to month, hoping for lower prices at some point in the future.
Indications earlier in the season pointed toward an outstanding crop year for the United States, especially compared with last year’s late-planted, late-developing and late-harvested crops, mainly corn. But this year crops were planted early, and summer moisture for the most part came in a timely manner, prompting the U.S. Department of Agriculture to forecast record large corn and soybean crops and record high yields for both in August. In September the corn estimate was trimmed by 2%, still slightly above the previous record, but the soybean forecast was raised to an even higher record.
Lower-than-expected yields in early-harvested corn resulted in growing doubt about the U.S.D.A. forecast, ideas dry weather in eastern parts of the Corn Belt may have had a greater impact than first thought, and contributed to the run-up in corn futures prices.
More recently parts of the Corn Belt, especially west of the Mississippi river, have seen heavy rainfall, slowing harvest of corn, soybeans and even spring wheat and durum in the Upper Midwest. Last week may have been the worst for anxious farmers.
“An impressive late-season surge of monsoon moisture will continue to interact with a cold front crossing the Plains and the Midwest,” the U.S.D.A. said in its Sept. 23 Agricultural Weather Highlights. Trade sources indicated as much as four inches of rain fell in parts of southern Minnesota late last week.
It was especially frustrating for U.S. farmers as much of their corn was ready to combine. The crop in the 18 largest producing states averaged 69% mature as of Sept. 19, far ahead of 20% last year and 48% as the 2005-09 average for the date, the U.S.D.A. said in its weekly Crop Progress report. The longer a mature crop stands in the field, more bad things than good things tend to happen, such as lodging (falling over) and disease.
But the worst may also be over, said David Salmon, owner of Weather Derivatives, Inc., a private energy and agricultural weather forecasting service in Belton, Mo.
“I think it’s a one-shot deal,” Mr. Salmon said of the heavy rainfall in the Upper Midwest last week. “There should be an extended dry period after this gush of rain. Harvesting could resume by the middle of this week.” But he noted the worst of the recent rain fell over a key part of the Corn Belt, affecting as much as 25% of the crop.
The U.S. corn crop in the 18 major states was 18% harvested as of Sept. 19, according to the U.S.D.A., up from 11% a week earlier, well ahead of 4% last year and compared with 10% as the 2005-09 average for the date. Soybeans in the 18 major states were 8% combined as of Sept. 19, up from 2% last year and from 6% as the average, but key states in the eastern Corn Belt were well ahead of average. States east of the Mississippi river saw rapid, if not record corn harvest progress, with milling quality of the crop far superior to last year’s high-moisture grain.
Canada’s crop situation this year was more like that of the United States’ last year. Excessive spring moisture delayed planting and crop development lagged the average pace all season. The shorter growing season north of the border came into play two weeks ago as a major freeze across much of the key growing areas of the Prairie Provinces effectively ended the growing season. The freeze was not early. The crops were late, and if not outright losses, at least significant quality damage occurred in wheat, oats, canola, flaxseed and other crops, according to the Canadian Wheat Board. It was especially worrisome for U.S. oats millers who originate much of their supply from Canada and for oats product users. Oat flake prices, basis Minneapolis, were at two-year highs last week.
The next key date will be Oct. 8 when the U.S.D.A. releases its next Crop Production report, with the trade expecting another downward adjustment to U.S. corn yields.