WASHINGTON — Nearby corn futures surged to five-year highs in the past two weeks after the U.S. Department of Agriculture on June 11 slashed its outlook for 2019 corn production and 2020 carryover. The crop has a long season ahead, but unprecedented planting delays prompted the U.S.D.A. to reduce from May its forecast of 2019 planted area by 3.2%, harvested area by 3.5%, average yield by 6%, production by 9% and carryover on Sept. 1, 2020, by 33%, while raising its average price outlook by 15% for 2019-20.
The 2019 U.S. corn crop was projected at 13,680 million bus, down 740 million bus, or 5%, from 2018 and the lowest since 2015, with the 1,350-million-bu cut from the May projection the largest month-to-month reduction since 2012 in volume and the largest since the mid-1980s in percentage (down 9%), the U.S.D.A. said in its June 13 Feed Outlook.
The U.S.D.A.’s projected 2020 carryover of 1,675 million bus was 13% below the average of trade estimates that ranged from 1,633 million to 2,404 million bus, according to a pre-report survey by Reuters.
The average price paid to farmers for corn in 2019-20 was projected at $3.80 per bu, up 50c from the May projection and up 20c from the 2018-19 forecast.
The June 11 projections suggest the 2019-20 corn market will be supply driven, even if higher prices and tighter supply may reduce demand for domestic feed use and for corn exports, with Brazil and Argentina expected to take up the slack in the latter.
The nearby CME Group corn future rose to a five-year high of $4.64¼ a bu on June 17, up 56c a bu, or 14%, from an intra-day low of $4.08¼ a bu on June 11, the day the U.S.D.A. released its monthly World Agricultural Supply and Demand Estimates report. The new-crop December 2019 future hit a high of $4.73 per bu on June 17, up 45½c, or 11%, from its June 11 intra-day low. Futures pulled back some by midweek, and there were mixed ideas about prices going forward.
Paul Meyers, vice-president of commodity analysis, Foresight Commodity Services, Inc., said he expects nearby corn futures will trade in the $4 to $4.50 per bu range over the next three to five months. He acknowledged some analysts have forecast prices to rise to around $5, which he said he wouldn’t rule out should there be another “surprise” to the market in the coming weeks. Otherwise, he thinks prices will be held in check because of lower corn use, which he believes the U.S.D.A. has forecast too high, particularly for ethanol. He agreed with the U.S.D.A.’s 2019 corn production forecast, but sees carryover on Sept. 1, 2020, nearer 1.8 billion bus due to lower corn use (versus the 1,675 million bus projected by the U.S.D.A.).
University of Illinois agricultural economist Todd Hubbs, in the June 17 farmdoc daily, said, “The reduction in corn planted acreage by 3 million acres and corn yield by 10 bus per acre in the June WASDE appears to be a harbinger of things to come this year. The only question remaining is the scale of the acreage loss.”
Mr. Hubbs noted that the U.S.D.A.’s Crop Progress report indicated 14.5 million acres of corn remained unplanted in the 18 largest-producing states as of June 9 (based on 83% planted of the March Prospective Plantings forecast of 92.8 million acres).
“The amount of prevented planted acreage in those estimates remains uncertain, but the prospect of planting more than 14 million acres of corn after June 10 seems daunting,” Mr. Hubbs said.
As of June 16, planting had progressed to 92% completed, suggesting 7.4 million acres yet to plant out. Progress was slowed by more rainy weather across parts of the Corn Belt last week. Further, maximum corn yields begin to fall precipitously for corn planted after June 10, which tends to discourage planting, with prevent plant dates and crop insurance deadlines also a consideration.
Mr. Meyers expects there will be about 6 million fewer corn acres planted than forecast in the Prospective Plantings report.
Acres yet to be planted mostly were concentrated in the eastern Central states of Illinois (88% planted as of June 16), Indiana (84%), Ohio (68%) and Michigan (84%) and in South Dakota (78%) and Wisconsin 87%). Those states typically are 98% to mostly 100% planted by mid-June.
A survey-based planted area estimate will be issued in the U.S.D.A.’s June 28 Acreage report, which along with the Grain Stocks report (stocks as of June 1) on the same day “looks to set the tone for summer corn prices,” Mr. Hubbs said, adding that, “The Acreage report should overwhelm any information in the stocks report.”
The first U.S.D.A. survey-based 2019 corn production estimate for 2019 will be issued Aug. 12. Meanwhile, Mr. Meyers expects more crop variability and market volatility ahead.