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Planting delay realities

We've been hinting for some time that planting delays will become more of an
issue for producers in 2009, and that is finally starting to get the trade's
attention. While its still early for corn (2% planted vs. 6% normal), for
northern Plains producers we are showing a bigger lagging from normal planting
pace (barley at 3% planted vs. 13% normal; HRS 2% planted vs. 11% normal).
These numbers won't see a lot of progress this week either, and are likely to
fall back even further behind the average pace for the next 2 weeks (at least).

Of course, this can change with the right weather. But so far, the weather has
not been right for drying and warming up soil. Instead, the cold/wet forecasts
continue to suggest further planting delays, with most ground not likely to be
planted until May. That leaves a very short season for producers to get their
work done.

It doesn't take long to start cutting corn carryout significantly from the 1.7
billion currently estimated with a late corn planting scenario. First, we could
lose 1-2 million acres, which means a roughly 150-300 million bushel loss in
potential carryout. We also could lose 3-5 bushels of yield potential, which
represents another loss of 250-400 mb of carryout. That's a total loss of
production of 400-700 mb, and now we have carryout closer to 800 mb to 1 billion
bushels (or a pretty tight corn carryout!).

This loss in production might be even more meaningful if demand bounces back to
2007 levels. That would mean exports expand 700 mb from current levels, and
feed demand expands about 600 mb. It doesn't take long to come up with negative
carryout with both supply cuts (due to late/prevented planting) and demand
expansion back to 2007 levels. In essence, we cannot have a return of 2007
demand as we simply would not have the supply to feed it. If demand recovered,
prices would have to start rationing demand such that it could not get to 2007
levels again.

This is what will keep markets on edge over the next few weeks, especially if
demand continues to expand. Economists state it takes 4-8 months to see the
impact of significant changes in prices and their effect on demand. Well, since
our peak last summer it has already been 10 months, and from lows made last
November it already has been 5 months. Demand will start to improve, and
already we are seeing it on the export side of the equation. If world
recessions end and inflation becomes the new norm, it could be surprising how
quickly demand can respond to these important changes in the US economy.
Domestically, these numbers get even better as feed and ethanol use are the two
biggest uses by far of US corn.

While markets recently (especially stocks) have shown a manic-depressive type
behavior (from good to bad in short periods of time), the grain markets can also
have the same tendency. It could be an interesting year as we try to decipher
what 2009 will actually be like. The keys to the equation are always focused on
the supply side during the growing season with demand assumed to be constant.
But as we move through 2009/10 marketing year, we may have more changes to deal
with than we want to - and right now those supplies seem to be shrinking rather
than expanding.

Soybeans may be a different animal when it comes to supply/demand numbers with
late planting. Some or even most of the lost corn acreage from late planting
could move over to soybeans (if weather improves in time for soybean planting).
Unless bushels are lost due to late planting or planting in sub-prime conditions
(in mud, for instance), then soybeans likely won't see as positive a price
outlook as corn for the 2009/10 crop year. Of course, the shortage in 2008 crop
soybeans this late summer might be an impetus to push soybeans higher in the
near term, anyway. If we keep exporting at the current rate, we might just run
out of soybeans for the 2008 crop year, making price outlooks for 2009 improve
(at least some). But the supply is the price negative for 2009/10 soybean
crops, and it does appear at least for now that we will have the 2009 supplies
that are needed. Demand would have to expand significantly for soybean stocks
to get tight, but given the insatiable demand from China this past year (even
during recession!), perhaps demand will remain strong (or get even stronger) in
2009/10?

The information contained, while not guaranteed as to accuracy or
completeness, has been obtained from sources we believe to be
reliable. The opinions and recommendations contained are based on
our judgment and do not guarantee that profits will be achieved
or that losses will not be incurred. Recommendations should not
be construed as an offer to buy or sell commodities. There is
substantial risk of loss in trading futures and options on
futures.

If you have questions about this column, call Progressive Ag at 1-800-450-1404,
or email ray at rlg@progressiveag.com.

We've been hinting for some time that planting delays will become more of an issue for producers in 2009, and that is finally starting to get the trade's attention. While its still early for corn (2% planted vs. 6% normal), for northern Plains producers we are showing a bigger lagging from normal planting pace (barley at 3% planted vs. 13% normal; HRS 2% planted vs. 11% normal). These numbers won't see a lot of progress this week either, and are likely to fall back even further behind the average pace for the next 2 weeks (at least).

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