“…It is worth considering just how much more bearish the grain market outlook has become over the past couple of months,” say John Michael Riley – Mississippi State ag economist, and John D. Anderson, American Farm Bureau Federation livestock economist.

May 25, 2010

5 Min Read
Bearish Fundamentals Still Exist For Corn

“…It is worth considering just how much more bearish the grain market outlook has become over the past couple of months,” say John Michael Riley – Mississippi State ag economist, and John D. Anderson, American Farm Bureau Federation livestock economist.

Writing in last week’s In the Cattle Markets, the economists point out that while May World Ag Supply and Demand Estimates (WASDE) projected less corn carryover for the 2009-1010 and 2010-2011 crop years, these are still higher than February’s WASDE estimates.

“The primary reason for the more recent projections of increasing carryover is the auspicious beginning to the 2010 crop,” say the economists. “The Crop Progress report for the 18th week of the year (released the day before the WASDE) showed the corn crop at 81% planted nationally. This is the fastest pace of planting on record. Timely planting increases the yield potential of the corn crop, and USDA yield estimates reflect this.”

For perspective, the estimated yield in the most recent WASDE report is 163.5 bu./acre; it was 160.9 bu./acre in February.

“Unfortunately, yield potential is not the same thing as actual yield, and this year’s crop is obviously a long way from being in the bin,” say Riley and Anderson. “In light of this fact, USDA’s estimate of 13.3 billion bu. of corn use is rather sobering. As has been the case for several years now, the market will be in no position to tolerate a short crop situation. Thus the potential for volatile corn prices is still with us, though the situation has improved notably since this winter.”

As far as the market that sets the global price for corn, Dan O’Brien, Kansas State University Extension grain economist, explains in his Grain Market Outlook commentary, “In the world coarse grain market, the U.S. is projected to export 48% of all coarse grain exports in the 2010-11 marketing year. For corn (a subset of coarse grains), the U.S. is projected to export 57.4% of all 2010-11 corn exports. Argentina (17.5%) and Brazil (13.8%) are the next largest projected corn export competitors in 2010-11. Given the predominant position of the U.S. in coarse grain and corn export markets, it seems that what happens in the U.S. in terms of production, use and ending stocks essentially ‘drives’ or ‘nearly determines’ the world market.”

For the week ending May 16, according to the National Agricultural Statistics Service:

Corn – 87% is in the ground, 26% more than last year and 9% more than average. With below-average temps and above-average precipitation restricting the number of days suitable for fieldwork during the week, planting progress was limited to 5% or less in Illinois, Indiana, Iowa and Minnesota, four of the five largest corn-producing states. 55% has emerged, 27% more than last year and 16% more than average. 67% in Good to Excellent condition.

Soybeans – 38% is planted, 15% more than last year and 3% more than average. While planting progress in Iowa, the largest soybean-producing state, surpassed the halfway point during the week, producers in some northernmost areas of Indiana were expecting to replant a small portion of their soybean crop because of frost damage incurred during recent cold spells. 13% is planted, 8% more than last year and 4% more than average.

Winter wheat – 52% was at or beyond the heading stage, 2% more than last year, but 4% behind the average. Despite rapid head development in Kansas and Texas, the two largest winter wheat-producing states, overall progress remained slightly behind normal. 66% is in Good to Excellent condition, 18% more than last year.

Spring wheat – 79% is planted, which is 30% ahead of last year but 1% behind the five-year average. The most seeding progress was evident in Montana, where warm weather and sunshine allowed producers back into their fields for much of the week. Emergence was rapid across much of the major growing region. 55% has emerged, 34% ahead of last year and 8% ahead of the 5-year average.

Sorghum – 39% is planted, which is 4% ahead of last year and normal. In Kansas, the largest sorghum-producing state, above average rainfall allowed producers just three days to plant 3% of their crop. Hot, windy conditions in South Texas left dryland sorghum showing signs of crop stress.

Oats – 92% of seeding is complete, which is 6% ahead of last year but 1% behind the average pace. With the exception of the Dakotas, seeding was nearly complete across much of the major growing region. Despite progress of 24% during the week, overall progress in North Dakota remained nearly one week behind normal. 81% of the crop has emerged, 12% ahead of last year and 7% ahead of average. 78% is reported in Good or Excellent condition; 46% was at the same time a year ago.

Barley – 75% is planted, which is 26% ahead of last year but 3% behind normal. In North Dakota (largest barley-producing state), cool, wet conditions early in the week gave way to favorable weather conditions by week’s end, promoting seeding progress of 22% during the week. 43% has emerged, which is 14% ahead of last year and on par with the five-year average.

Pasture – 64% of the nation’s pasture and range is rated as Good or Excellent, 6% more than at the same time last year; 9% is rated Poor or Very Poor, compared to 16% a year ago. States reporting more than 15% of pasture as Poor or Very Poor were: Arizona (18%); Louisiana (27%); Mississippi (18%); New Mexico (23%); North Carolina (22%); Texas (16%); Virginia (15%); and West Virginia (16%).

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