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Corn price strength grows on supply issues June

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HowardHughs Member Level  Tuesday, 06/04/19 09:18:07 AM
Re: HowardHughs post# 128
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Corn price strength grows on supply issues June 2, 2019

Wet conditions has delayed the planting season throughout the Upper Midwest and the Corn Belt...areas where the prevented plant deadline has already passed

Reduced acreage and lost yield potential for the 2019 corn crop look to drive prices higher as the wet weather continues to cover much of the Corn Belt. The magnitude of the production loss appears set to hit a level similar to a severe drought.

Weakening demand may temper the rally, but the potential of a decline in corn stocks is massive for the 2019-20 marketing year.

An estimate of actual planted acres arrives with USDA’s June 28 Acreage report, but current planting pace and weather conditions point toward a sizable loss of corn acres.

The release of another round of Market Facilitation Payments may influence corn-planting decisions. Given the uncertainty surrounding payments, the potential for prevented plant acreage exceeding the record 3.6 million acres documented for corn prevent planting in 2013 appears certain.

The prevented plant deadline of May 25 passed for many areas of North Dakota, South Dakota, Nebraska, Missouri, and Kansas. In 2013, those states prevent planted approximately 969 thousand acres. As of May 19, 13.67 million acres of corn in those states remained unplanted.

The prevent plant date for Minnesota, Wisconsin, and Iowa—states dealing with very wet conditions—was May 31. In total, 10.2 million acres in those three state remain unplanted as of the May 19 planting progress report.

Wet weather over the Corn Belt over the last week points toward reduced levels of planting progress as of the May 28 report and an expectation of more than 35 million acres of corn left unplanted. If one assumes minimal prevented plant or acreage switching, large areas of the Corn Belt look to plant corn very late in the planting window.

Agronomic studies on yield and planting date in Illinois show substantial yield loss when planting after May 20. As planting moves further past May 20, yield loss accelerates with field trials showing 1.1 bushels per acre per day past May 30.

While demand appears to be weakening, the potential crop shortfall points toward much higher corn prices in 2019.

Uncertainty about the size of the 2019 corn crop will continue for the next few months. Corn prices appear set to take on the pattern of a price spike and long tail associated with a crop shortfall. Corn marketing in 2019-20 should reflect this reality.

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