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WEIGHING IN: Late Corn Brings Bullish Analysis

Word from USDA late yesterday is that corn planting has passed the halfway mark. The cool, wet conditions in many corn-growing areas in the country have meant that the 2008 planting is lagging well behind the five-year average of 77 percent planting done at this time.

Elaine Kub, a DTN analyst, and I had a nice chat last Friday about how this is affecting your growers’ prices. And we all know, grower concerns about prices affects their in-season input spending at your outlet.

Bryce She was concerned at that time about how much corn would be planted by mid-May. "Especially in the Corn Belt, they like to have at least half of their crop planted by now," she said. Naturally, there are some folks who have planted much more than half (yesterday’s USDA weekly crop report said, for example, that about 80 percent of Oklahoma’s crop is in), and conversely, other areas are way behind.

Later planting means the plant has less time to mature and could end up trying to pollinate in the really hot part of summer -- "and that really tends to drag on yields," she said. "So there’s all kinds of expectations for yields to really drop. The trend line going into this season is about 154.9 bushels per acre. USDA dropped the expectation to 153.9, but they were probably very conservative when they did that -- it could be much lower than that."

Kub expects the supply and demand to continue to tighten going into next year for corn because of demand. "The demand is still being led by biofuels for both corn and soybeans," she said. "Ethanol prediction was bumped up 1 billion bushels to 4 billion bushels in the 80/09 markeing year. And in soybeans, a lot of the usage categories were dropped down, but the one that remained higher was the soybean oils and methyl esters. They (USDA) bumped that up 3.2 billion pounds of soybean oil.

"And exports are going down," she added. "Across the board, exports for corn, soybeans, and wheat are all expected to drop a little bit next year. We had a very bullish export year that we’re in right now, and a lot of that was tied to the dollar. That expectation is kind of been washed off; it seems like the dollar has really bottomed out and might start to regain some strength, so the outlook for exports is nowhere near as bullish as it was this year. But that doesn’t necessarily mean that it’s bearish, either; it just kinda takes us back to what’s normal."

I asked one final question: Does she think that your grower-customers may want to still switch their late corn acreage to soybeans?

"I don’t think that’s going to be a major affect, simply because the way that the corn market has kept on rallying, the economics work out," she said. "Even if you have to take some yield loss, the economics still work out for most places to plant corn instead of soybeans -- if you have the seed and everything already lined up. So, I’m not exactly seeing any major acreage change in corn acreage from what people were expecting, and if you value what USDA has to say, they said that same thing (Friday, May 9) morning. It was really unlikely that they would have ever changed any acreage numbers from the March 31st perspective planting report and they haven’t, those are still set the same."

Of course, as with any expectations this early in the season, we’ll just have to wait to see what the rest of the planting season brings.

Stay safe!

Amy L. Fahnestock
alfahnestock@meistermedia.com
Senior Associate Editor, CropLife Group