Corn Commentary

Cold, Wet Weather Dampens Planting Party

After getting off to a good start, planting has slowed down around the corn belt, thanks to cold and wet weather. USDA showed progress at eight percent, just a point below normal for this time of year, but way behind last year’s swift pace of 16 percent. Only two states are showing planting ahead of normal right now and they are Missouri and Kansas - both of which made excellent progress last week.

While there is nothing to be concerned about yet, the markets were happy to react early in the week on fears that the delays will reduce yields. That can certainly happen, especially if these cool soil temperatures continue and emergence is delayed. Kansas State University extension specialist Craig Roseboom says if just one out of six plants is delayed by two leaf stages, yields could be reduced by 3-4 percent. “They’re not huge yield reductions, but prices are good and even a three percent yield reduction at 200 bushel corn, that’s $36 an acre in terms of potential gross receipts,” Roseboom says.

But, the forecast is looking better, at least according to the markets which took a dive later in the week on that good news. With as fickle as the weather has been lately, it is certainly way too early to make any predictions about how this planting season will end up. Just keep praying that the good Lord is willing and the creeks don’t rise.

Let the Planting Party Begin!

It’s still early - very early - but so far, planting is right about average for this time of year.

The first USDA crop progress report reflecting the planting season has three percent of the nation’s corn crop planted - the same as both last year and the five year average. There’s a few states a little low and a couple running well ahead of schedule, so it all evens out. It’s still a little wet in some areas for planting, but others are making up for that. Just having Illinois at four percent - three percent ahead of normal - brings the average up for the whole nation. Texas is just a little below average for this time of year with 55% planted.

The forecast for the next week is looking pretty iffy for planting in many areas - with snow a possibility in the Corn Belt yet again! The long, cold, lonely winter may not be over yet, but the planting party has begun.

USDA Acknowledges DDGs in Report

With no fanfare, USDA made a subtle, but significant, change in the way it reports corn use for ethanol in the new world supply and demand report, acknowledging for the first time the mountain of livestock feed produced as a by-product of ethanol.

Instead of calling the usage category “ethanol for fuel,” USDA has changed the wording to “ethanol & byproducts,” with a footnote reading “Corn used to produce ethanol and by-products including distillers’ grains, corn gluten feed, corn gluten meal, and corn oil.”

This is something the industry has been asking the department to do for a while now, since it otherwise suggests that ethanol alone gobbles up nearly 40 percent of the corn produced in the country. In fact, when the animal feed co-products are taken into account, ethanol accounts for only about 23% of the corn production - a significant difference.

Will it make any difference in the way corn for ethanol usage is viewed? Maybe not, but it’s a good start.

Analyzing USDA Numbers

USDA expects more five percent more corn to be planted this year according to the Prospective Plantings report released last week, but stocks are down 15% from last year at this time.

USDASo what does that mean to the average corn grower? First of all, it means that higher prices translate to higher acreage. “This report shows that the innovative American farmer understands the increasing global demands of corn for food, feed, fuel and fiber and that they see the importance of meetings those needs,” National Corn Growers President Bart Schott said.

However, despite farmers’ best intentions, Mother Nature may have other plans this spring. “We have concerns right now about the Northern Plains, potential flooding there and how that might affect spring planting,” said USDA Chief Economist Joe Glauber. “A lot depends on growing conditions at the time and further price movements.”

Brian Hoops on Midwest Market Solutions says that could mean less spring wheat acres and more corn. “We get a little bit of a delay in getting those spring wheat acres in, farmers will most likely shift over to corn,” he said during a Minneapolis Grain Exchange (MGEX) conference call.

In past 20 years, the prospective corn acreage estimate has varied from the final acreage estimate by an average of 1.14 million acres - erring mostly on the high side. Eight times the estimate has been below the actual and 12 times it has been above - in other words, it could go either way.

As for the lower stocks, Renewable Fuels Association Vice President of Research and Analysis Geoff Cooper is confident that farmers can make that up. “To increase carry-out stocks to near one billion bushels, an average yield of 163.5 bushels per acre would be needed,” he said. “Such a yield is entirely possible and in line with trend yield growth from the last 15 years. In 2009, American farmers set the all-time yield record at 164.7 bushels per acre.”

Cooper notes that the corn for ethanol use estimate by USDA is probably not accurate. “We think that USDA may actually be underestimating ethanol yields, especially based on the fact that the 2010 crop was of exceptional quality and high test weights,” he said. “We’re hearing lots of plants getting 2.9 gallons per bushel or better and it appears that USDA has been using an ethanol yield number of 2.7, and that could make a big difference in corn usage.” Not to mention the fact that ethanol is only using 23% of the 10/11 corn supply, not 40%, since the rest comes out as livestock feed in the form of DDGS.

So, the big takeaway from last week’s reports should be simply that this year’s corn acreage and stocks will depend mostly on the weather and prices - no surprises there.

Ag Secretary Urges Support for Agriculture

The secretary of agriculture has one of the toughest jobs in the administration. Despite the title, direct support to agriculture is only a small part of the USDA, but it has everything to do with the rest of it. Maybe a better title would be Secretary of Food, Farming, Feed, Fuel, Fiber and Forestry so that Americans are more aware of how agriculture touches every aspect of their lives.

tom vilsackLast week, U. S. Secretary of Agriculture Tom Vilsack made a visit to St. Louis where he was the keynote speaker at the St. Louis Agribusiness Club meeting. Noting that 44% of the nation’s agricultural production is located within a 500 mile radius of St. Louis, including 75% of the nation’s corn and soybeans, the secretary focused his remarks the importance of agriculture to the country as a whole.

“It has to do with the value system of this country,” he said. “Virtually everyone who started this country was a farmer and virtually every single founding father came from a rural background. And here’s what they knew and here’s what every farm and ranch family has passed on from generation to generation - and that is that you cannot keep taking from the land. It’s a basic understanding of agriculture.”

Vilsack said that philosophy of giving back has carried over to the young people of rural America. “That’s why 16% of the population of the country lives in rural America but 44% of our military comes from rural America,” he noted.

Vilsack stresses the importance of agriculture and rural America to those in Washington DC, but he says it is critical for those in agriculture to stick together when they represent less than one percent of the population. “There aren’t enough of us to be fussing with each other. We have got to have a single voice about the important role that agriculture plays in the life of every single American.”

You can listen to or download the Secretary’s Comments here: Secretary Vilsack's Remarks

Sunny Harvest Progress

What a difference a year makes! Last year at this time, you may remember, wet weather was delaying the harvest all over the corn belt. This year, some areas have been getting rain, but the harvest is making great progress.

According to USDA, crop maturation continued at a rapid pace as warm, mostly dry weather prevailed throughout much of the major producing areas during the week. By September 19, sixty-nine percent of the crop was at or beyond the mature stage, 49 percentage points, or 20 days, ahead of last year and 21 percentage points ahead of the 5-year average. Crop maturity was 58 percentage points or more ahead last year and 30 percentage points or more ahead of the 5-year average in Illinois, Indiana, Iowa, Michigan, and Ohio. Producers had harvested 18 percent of the Nation’s corn crop by week’s end, 14 percentage points ahead of last year and 8 percentage points ahead of the 5-year average. Most notably, harvest advanced 20 points in Illinois during the week, leaving overall progress 37 percentage points ahead of last year and 26 percentage points ahead of the 5-year average. Overall, 68 percent of the corn crop was reported in good to excellent condition, unchanged from both last week and the same time last year.

The photo comes from the All Things Corn photo album on the Facebook of Tricia Braid with Illinois Corn Growers. According to Tricia, the corn in this McLean County plot “averaged 190 bushels, third year of corn, with a minimal nitrogen program. As were many acres this year, this field was planted in fairly crummy spring conditions after an even crummier 2009 harvest.”

Betting on Crop Quality Decline

USDA is still predicting a record corn crop, but the speculators are betting against that forecast.

Corn futures have been on a rally for a couple of weeks now, reaching the highest price level since October 2008 and closing at $4.95 for December yesterday on speculation that the crop will be smaller than USDA forecast last week, which was down from the previous forecast but still a record 13.16 billion bushels. Earlier this month, the Chicago Board of Trade set a record for corn futures contracts traded at 556,034, the busiest day since the CBOT began trading the grain in 1877. The previous record one-day record of 516,076 contracts was set on June 12, 2008.

Geoff Cooper with the Renewable Fuels Association (RFA) talked about the resurgence of speculators in the corn market in two recent posts on the RFA E-Xchange Blog. “Hedge and index funds are descending on the corn market in numbers not seen since the spectacular commodities bubble of 2008,” Geoff writes.

The condition of the crop did drop this week compared to last week, but only by one percent. That means that 68 percent of the corn is still rated in good to excellent condition, which is also only one percent less than last year. USDA reports that 93 percent of the corn crop was at or beyond the dented stage, 29 percentage points ahead of last year and 10 percentage points ahead of the 5-year average.

Beneficial growing conditions throughout much of the major corn-producing areas continue to produce rapid crop development. An additional 19 percent of the crop had reached the maturity stage during the week to total 52 percent by week’s end. Nationally, maturity development was 40 percentage points ahead of last year and 20 points ahead of the 5-year average. Of the 18 major corn-producing States, only Colorado and Texas were behind the 5-year average. Eleven percent of the Nation’s crop had been harvested by September 12, eight percentage points ahead of last year and 5 percentage points ahead of the 5-year average. At least half of the corn crop had been harvested in Kentucky, North Carolina, Tennessee, and Texas, with Tennessee the most advanced at 72 percent.

While there are concerns that weather issues may result in even lower yields, with only 11 percent harvested, the crop is still a long way from being in the bins - but that’s really the point, of course. If it we already knew what it would be, there would be no need for forecasts or speculation.

The nice photo of dented corn comes from the Nebraska Corn Board’s Flickr photo album.

Harvest is Underway

First report from USDA on this year’s harvest is out this week, showing only Texas and Pennsylvania behind schedule for this time of year, with most of the states running well ahead.

Total for the nation is 6 percent, compared to two percent last year and four percent average. About half the corn is combined in Tennessee and North Carolina, where a good portion of the crop is rated below average compared to the rest of the country. All of the I-states have numbers in the harvested column this week, when none were there this time last year. Illinois has seven percent harvested already, compared to nothing last year and two percent average.

We highlighted Kelly Robertson of Benton, IL here on Corn Commentary earlier this year because he was one of the first to plant this spring. And he’s also one of the first to harvest, starting over a week ago. Here is a video from the Robertson Farm blog.

Agriculture is Bright Spot in US Economy

In the face of bad news for the general economy in the United States, agriculture is looking pretty good.

Last week we heard that U.S. economic growth dropped to just 1.6 percent in the second quarter of this year, compared to 3.7 percent for the first three months, and some say it could be below one percent next quarter. Meanwhile, unemployment continues to flirt with double digits, riding at 9.5 percent overall.

But the agricultural sector is showing a significant increase in both farm income and exports. It’s all up about 23-24 percent compared to last year. Granted, last year was down 20 percent from the year before, which was a record for exports and near record for farm income. But, it definitely spells R-E-C-O-V-E-R-Y, unlike the rest of the economy, despite the best of efforts to make that happen.

“The great thing about this recovery is that it’s sector-wide,” said Agriculture Secretary Tom Vilsack in a press conference today about the new reports. “While an increase in the value of livestock production accounted for much of the upward movement, the value of dairy production rose by 26.2 percent; the value of meat animal production is up 14.6 percent, and the value of poultry and egg production rose 8.4 percent.” That’s all good news for corn farmers.

USDA increased its forecast for 2010 exports by $3 billion compared to May to $107.5 billion, due mostly to greater grain and feed shipments and higher values along with increased livestock, poultry, and dairy product exports. “Agriculture is one of the few major sectors of the economy today that has a trade surplus, which we are now forecasting to be a little over $30 billion,” said Vilsack. That is also forecast to get even better next year, up to $113 billion, very close to the record $115 in 2008, thanks to sharply higher unit values and volumes for wheat and corn, as well as increases in products like distillers’ dried grains (DDGS). Vilsack points out that every billion dollars in agricultural exports supports over 8,000 jobs and generates an additional $1.4 billion in economic activity.

Kind of makes you wonder where our economy would be right now without farmers and ranchers, doesn’t it? Vilsack noted the significance of the “underlying values of rural America and its farmers and ranchers to the resilience of the agriculture sector.” In other words, farmers and ranchers are not afraid of hard work, they have kept their debt below that of the rest of the economic sectors, and they continue to increase productivity through innovation and research.

It is really a very simple solution to economic problems. Hard work + low debt + increased productivity = economic recovery. The rest of the economy certainly could learn a lot from the farm.

Corn Crop Continues to Look Great

Despite heavy rains and some brutal summer heat, the corn crop nationwide looks great.

illinois corn summer 2010According to the latest USDA report out this week, 72 percent of the crop is rated good to excellent, with a few more percentage points moving over to the excellent side. On the progress side, 84 percent of the crop is silking - compared to 70 percent average and 52 percent last year, and 17 percent is in the dough stage already, which is 10 points ahead of this time last year and a few points ahead of normal.

Only two of the major corn production states - Colorado and South Dakota - have not yet reached the halfway point in silking, according to USDA meteorologist Brad Rippey. “If you’re looking for problems with the corn, you’ll have to go to the fringes of the corn belt, well outside the major production zone,” he said. “In North Carolina, where it’s been very hot and dry, for example - 38 percent of the crop rated very poor to poor.”

The good-looking corn pictured here is growing near Bloomington - a photo taken recently by Tricia Braid-Terry of the Illinois Corn Growers’ staff. The good-looking young man in the the photo is her son, Ian. Thanks, Tricia!

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