The conversation in April has been about rain and when would it stop. Corn got off to a late start, but at this point, the markets do not seem to be concerned, as December corn is about $3.86, and not far from its 2017 low of $3.78-1/4.
One reason for the market’s apathy is the ability of farmers to plant a lot in a very short period of time. As of April 16, corn was 6% planted versus 12% a year ago and the 9% average. Iowa and Illinois were at 2% and 6% planted, respectively, versus their 4% and 13% averages.
Another reason is that concerns about late corn planting typically do not reach critical mass until May. After mid-May, yield potential can drop off.
Farm Futures senior grain market analyst Bryce Knorr compiled a historical map that shows states west of the Mississippi River have more to gain in yields by planting corn before May 15 than states east of the river, where there were minor, if any, yield variances. Data used for the map ranged from 1980 to 2016.
“Getting the crop in early is more important west of the Mississippi River, where summer heat and dryness tend to be more extreme. It is less of an issue in the eastern Midwest,” Knorr says.
As of mid-April, USDA had not released planting progress for 2017 soybeans. A year ago, as of April 24, 3% were planted versus 2% in 2015 and the 2% average.
The National Weather Service offers some hope with its with 30- and 90-day forecasts, which cover May and May to July. It favors a normal seasonal rain pattern for most of the Midwest, which should provide some opportunities to get the crops in. The 30-day forecast also favors above-normal temperatures for the eastern Midwest and normal temps to the west, while the 90-day forecast favors above-normal temperatures for much of the country.
El Niño seen in late summer or fall
Forecasters continue to believe there is a 50% or better chance of an El Niño event during the second half of 2017.
The latest monthly forecast from the National Weather Service’s Climate Prediction Center says there is slightly less than a 50% probability for El Niño in the July-September period, a 50% probability for August-October and slightly better than 50% for September-November. These predictions follow one earlier in April by Australia’s weather bureau, which indicated a 50% chance for an El Niño event this year.
El Niño refers to the above-normal warming of the sea surface in the equatorial Pacific Ocean. That warming affects weather patterns around the world.
“Sea surface temperatures in the tropical eastern Pacific Ocean have warmed, with the warmth progressively spreading westwards since the start of the year,” Australian forecasters said in April. “Additionally, waters in the eastern Pacific subsurface have also warmed over the past few weeks.”
History shows an El Niño could produce above-average moisture across the Southern United States, dry conditions in Australia and wet conditions in South America. However, the timing and duration of an El Niño can affect the severity of these events.
“Yields in the past were sometimes very bad, sometimes very good, and everywhere in between. In the 35 summers with neutral readings since 1955, corn yields averaged 2% better than normal, with soybeans coming in 1% better,” says Knorr.
An El Niño event late this summer and fall could mean an increase in this year’s corn and soybean crops, plus bigger coarse grain and soybean yields in Argentina, and lower wheat and coarse grain yields in Australia, he says.
USDA: More corn for ethanol
USDA’s April supply-and-demand report leaves crop year-ending stocks unchanged for corn at 2.32 billion bushels, as the government increased ethanol use and lowered feed use by the same amount.
The increased amount going to ethanol is based on industry data showing record-high usage from December to February. In addition, “the pace of weekly ethanol production during March as indicated by the Energy Information Administration has also been above expectations,” USDA said in its April report.
Soybean ending stocks were raised by 10 million bushels to 445 million due to a reduction in “residual disappearance.” Exports and the crush numbers were left unchanged. The 445 million bushels was close to trade averages in wire service surveys.
U.S. wheat ending stocks increased by 30 million bushels to 1.159 billion, which topped some trade estimates. USDA arrived at that higher number by lowering feed and residual use.
In South America, USDA raised Argentina's and Brazil’s corn crops to 38.5 million and 93.5 million metric tons from 37.5 million and 91.5 million, respectively, and raised those soybean crops to 56 million and 111 million metric tons. The increases in corn are a little larger than many trade expectations, while the soybean numbers are about as expected.
“As I expected, the big news out of USDA’s reports was from South America, where the agency’s forecast for increased production is weighing on prices for corn and soybeans,” says Knorr. “USDA’s projections were a little more than the trade anticipated but pretty close to where I was at.”
In the world numbers, USDA raised carryouts for all three crops, with corn at nearly 223 million metric tons, up 3 million; soybeans at 87.41 million, up 4.4 million; and wheat at nearly 252.3 million, up nearly 2.4 million.
“Despite increasing its forecast for Chinese imports, adding almost 170 million bushels to world carryout was a real wake-up call to farmers around the world expanding production,” Knorr says of the soybean numbers. “The global economy is growing, but prices may have to stay low long enough for livestock production to ramp up and eat into the surplus.”
The 30 million-bushel increase in the U.S. wheat carryout was a little less than what Knorr expected but more than the broader trade forecasts.
“Exports are also disappointing, though USDA made no adjustment on that score this time,” Knorr says. “Wheat, even more than corn or beans, is all about weather, and the clock is ticking.”
USDA left wheat exports at 1.025 billion bushels, but lowered feed and residual use by 35 million bushels to 190 million, and lowered imports by 5 million bushels.
Burgdorfer is senior editor for Farm Futures.