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Early planting may be increasing price risk

Agriculture.com Staff 04/21/2010 @ 3:09pm

By next week, half of the nation's corn crop could be planted, estimates Purdue University agricultural economist Chis Hurt, and that could lead the USDA to nudge its first price projection for 2010 down slightly in its May 11 World Agricultural Supply and Demand Estimate. If prospects for the crop stay strong, it also may mean that growers will want to take another look at signing up for the ACRE (Average Crop Revenue Election) program by the June 1 deadline, he said.

At the start of this week 19% of the nation's corn crop was already in the ground, a record or near-record pace in many areas. With good weather, farmers can plant about 6% a day, Hurt told Agriculture.com early this week. Many areas should have four or five days of good planting weather before showers move through the Corn Belt this weekend.

"By next week, we could be near 45% to 50% planted," Hurt said.

Although futures prices rallied Wednesday, the good weather has been a factor in pressuring corn prices downward. And Hurt thinks the USDA may boost its corn supply estimate slightly in the May 11 report.

"They probably will have some enhancement, given that it appears we’ll have so much planted," he said.

The most recent mid-point of the USDA's price range for old crop 2009 corn was about $3.60 per bushel. The May 11 report will have the first projection for 2010 corn prices and Hurt expects the mid-point to be around $3.50.

Planting progress isn't nearly as important as weather during the growing season, a fact borne out by last year's late-planted corn crop that produced record yields.

"A necessary condition for high yields is favorable summer weather," Hurt said. Only about 10% of the yield is determined by planting date, while 80% comes from conditions during the summer growing season, he said.

That means there's a lot of uncertainty in the weather, and weather-driven markets, ahead of us. Still, downward pressure on corn prices could continue.

Because of that, farmers might want to consider signing up for the ACRE program by the June 1 deadline, Hurt suggested.

"What we've been saying, with this bearish corn market we've been working through since January, is that there is one last chance for protection on price," Hurt said.

By next week, half of the nation's corn crop could be planted, estimates Purdue University agricultural economist Chis Hurt, and that could lead the USDA to nudge its first price projection for 2010 down slightly in its May 11 World Agricultural Supply and Demand Estimate. If prospects for the crop stay strong, it also may mean that growers will want to take another look at signing up for the ACRE (Average Crop Revenue Election) program by the June 1 deadline, he said.

The first chance was to forward contract. But since prices fell from above $4 a bushel in early January, "it just has not been a market where producers would choose to forward contract," he said.

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