August 2, 2011
No matter what the U.S. Department of Agriculture data show in the first survey-based 2011 corn crop forecast on Aug. 11, weather will be a key factor for the rest of the growing season and during harvest, just as it was during planting, and recently it hasn’t been kind.
Days that have stretched into weeks of above normal temperatures, and with little rain in some areas, during the key pollination phase of corn, when most of the yield is determined, have the trade expecting the U.S.D.A. may lower its average yield forecast at least 3 bus an acre and as much as 5 bus an acre from its trend-line projection in July.
Average daytime highs have been 4 to 5 degrees above normal, with individual days much hotter, and nighttime lows have been 6 to 8 degrees above normal, said David Salmon, president of Weather Derivatives, Belton, Mo.
“Corn needs warm days and cool nights,” Mr. Salmon said. “I have to think this weather is not good for crops.”
Between the hot weather and dryness in some areas, Mr. Salmon estimated more than 400 million bus have been trimmed from this year’s corn crop over the past two weeks, based on yield alone. He estimated 2011 average yield at 155.2 bus an acre based on the July 24 U.S.D.A. weekly Crop Progress report condition ratings.
The U.S.DA. rated corn in the 18 major states at 62% good to excellent as of July 24, down from 66% a week earlier, from 69% two weeks ago and from 72% at the same time last year.
Based on acreage surveys and trend analysis, the U.S.D.A. projected U.S. 2011 corn production in its July World Agricultural Supply and Demand Estimates at a record 13,470 million bus, based on a yield of 158.7 bus an acre, the third highest ever, and planted area of 92.3 million acres, the highest since 2007 and the second highest since 1944, and harvested area of 84.9 million acres.
The trade was highly skeptical of the large acreage number, especially after weather-delayed planting in the Upper Midwest and eastern Corn Belt raised prospects of more unplanted area. In addition, the extremes of flooding along the Mississippi and Missouri rivers (among others) and drought across the Southwest and Southeast that has crept into southern portions of the Corn Belt likely have increased the number abandoned (unharvested) acres.
“Reports of corn and sorghum being cut for hay increased as dryland crops continued to fail and even irrigated crops were being impacted by the lack of irrigation water,” the Oklahoma U.S.D.A. field office said in its July 25 crop weather report. “In the face of limited hay supplies, cattle operators continued selling cattle.”
While not major producers compared with crops of states in the Corn Belt, fall row crops in some Southwest states were a disaster with poor to very poor condition ratings for corn at 71% in Texas and at 66% in Oklahoma as of July 24. In other areas, poor to very poor ratings on July 24 jumped to 53% from 40% a week earlier in North Carolina, to 34% from 25% in Kansas, to 30% from 11% in Pennsylvania, and to 22% from 16% in Missouri. The bad news is the hot weather isn’t over yet.
“The extreme heat probably goes away by the middle of August,” Mr. Salmon predicted, “but it will remain warmer than normal until September.” While normal highs have peaked seasonally, and he does not expect any more 100 degree days in the heart of the Corn Belt, Mr. Salmon still sees the potential for an additional 300 million bus to be trimmed from this year’s crop, especially with little relief expected across the Southwest.
A survey of analysts by the Reuters news service last week pegged the U.S. average corn yield at 155.6 bus an acre, down 3.1 bus from the U.S.D.A.’s July number, with a range of 153.5 to 157.5 bus an acre. Analysts noted north of Interstate 80 the corn crop was better than south of the highway, which runs through the heart of the Corn Belt.
The lower yields certainly have pushed the U.S. corn crop off the 14 billion bu pedestal some were hoping for early in the season, and with some trimming in acres, even prospects of a 13 billion bu crop appear to be fading. Still, the U.S. crop is far from a disaster on a national scale.
“It won’t be devastating,” Mr. Salmon said. Good soil moisture (excessive in the Upper Midwest and eastern Corn Belt) this spring will carry the crop through the summer, he noted.
Corn futures prices have been on a roller coaster ride all season. After the nearby contract peaked at a record high just shy of $8 a bu ($7.99¾) on June 10, prices plunged more than 20% by June 30. Since then, both old crop September and new crop December contracts have added back about 15% and were nearing $7 a bu, with September up more than 75% from a year ago and December up about 60%. While outside market factors have played a role, the single largest influence on corn prices during July has been the weather.
The August U.S.D.A. data again will be some of the most anticipated of the year, much as it was in the record price year of 2008, due to the heightened awareness of strong commodity prices and concerns about rising food prices amid a disappointing economic recovery, and to some extent the trade’s doubt about U.S.D.A. numbers in the June 30 Acreage report and July 12 WASDE. But for now, all the market can do is wait to see what the Aug. 11 U.S.D.A. Crop Production report says and what the weather will bring during the rest of the summer.