Last Friday’s World Agricultural Supply and Demand Estimates (WASDE) for May from USDA indicate new crop production and 2014 carryout levels are largely in line with pre-report expectations. Only the soybean crop (raised 1.2%) was more than 1% different from the average trade guess. Corn, wheat and soybean carryout stocks (i.e., remaining at the end of the marketing year) for 2014 were all above the midpoints of their respective ranges, but not by enough to have large impacts on prices for now.
But the USDA view of the world is not accepted by everyone, and it's not likely to be for some time. USDA is, for now, limited by either policy or choice in what they will say about planted acres. Friday’s report still shows the April prospective plantings for corn at 97.3 million acres. From that, 89.5 million acres representing a normal percentage of the total, is expected be harvested.
The question is, “Can we get to that planted acres figure given this year’s slow progress?” The answer is “yes.” In 1992, U.S. corn growers planted 43% of total acres in one week. Since 2000, the highest amount planted in one week has been 31%. In about one-third of the years since both 1990 and 2000, U.S. producers have planted over 30% of the intended corn acres in one week. At those rates, it doesn’t take long to catch up.
But it needs to happen soon. Though the historical data show a weak correlation (30% or so) between national corn yield and planting progress through early May, Robert Wisner, professor emeritus of Iowa State reports that agronomic data indicate that last week – week 18 of the year – is a critical period after which yield potentials decline modestly and then begin to fall more rapidly. He cites work by R.J. O'Brien March Research and Trading that found that plantings of 25% or more as of week 18 are associated with yields within a few bushels of trend. This week is critical for getting caught up.
USDA’s predicted 2014 corn carryout of 2.004 billion bushels still looks optimistic to me. Planted acres, harvested acres, yield (158 bu./acre) and total crop of 14.14 billion bushels all look rosy at this point. Ethanol usage of 4.85 billion (vs. 4.6 billion this year when ethanol margins were awful) looks very conservative. Feed/residual usage of 5.325 billion (vs. 4.4 billion in ’12-’13) looks pretty robust but is predicated on lower wheat feeding. It now looks virtually certain that chicken and pork output will grow significantly.
Wisner has a carryout of just 1.38 billion bushels next fall based on lower acres (96.5 million acres planted, 88.8 million acres harvested) and his most likely national yield of 155 bu./acre. That is still 83% more corn than is forecast to be available this year-end. Such stocks would put season-average corn prices near $5.00/bu., and Iowa harvest prices at $4.50/bu., Wisner projects. Those look pretty reasonable to me at this point.
Corn is Tight, Soybeans Tighter
The catch for pork producers is not the coming crop year but rather getting through this crop year. Significant frost damage to the hard red winter wheat crop will make it far less available or affordable for feed in the west this summer. If you think corn planting is delayed, look at the situation facing spring wheat areas in the northern plains. While conditions look very good for soft red wheat in the east and southeast, that crop will not be available until September or so. Thus, wheat as a potential “pressure reliever” on old crop corn supplies has moved against us.
Late planting also means that there will be little or no corn available from the next crop year to be fed in this crop year (i.e., before Aug. 31). That was a big factor last year that simply won’t be in play this summer.
The soybean situation is even tighter. The projected carryout remains at 125 million bushels. That level is significantly lower than the 138 million bushels in ’08-’09, when crushers scrambled for summer supplies. Iowa soybean buyers are offering as much as 60 cents over nearby futures, implying very tight local supplies. A few companies have announced crushing plants are being idled for maintenance – something that needs to be done but usually only happens when supplies are very tight and are not expected to get better for a while.
I’ve been singing this song for a long time, so let’s all repeat the refrain together: “Get your feed supplies secured for the summer!” While you may have them priced, get the physical supply secured somewhere. Obviously, it doesn’t have to be in your bins yet, but own it soon.
Next year’s situation looks better, but the first order of business is getting to next year, first.
Sorry, No Summary Tables this Week
Data for the Prices & Production Summary tables are not all available today. We’ll offer an update next week.
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