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Delayed Planting Not A Concern, Analyst Says

05/11/2014 @ 4:30pm

Where possible, corn planters are pushing hard to plant crop in a timely fashion to catch up after a cool, wet spring. Does it matter? It might. For now, it is not time for worry or concern. Early-planted corn is not necessarily indicative of across-the-board high yield, nor is late-planted corn necessarily indicative of across-the-board lower yield.

As of Sunday, May 4, 29% of the corn crop was planted. This is in comparison to a five-year average of 42%. With today's tillage practices and improved equipment, along with skilled farmers, it does not take long to plant the corn crop. This was evident last year when 40% of the crop was planted within a week's time. This week's report also indicated that Illinois was at 43% complete versus a five-year average of 41%, and Missouri was actually ahead of schedule at 63% versus 51%. Indiana only completed 20% versus 34%, and Iowa was at 23% versus 50%. However, as planters roll this week, look for Illinois, Iowa and Indiana to make significant progress.

Of particular note are the northern states. A harsh winter, along with a later spring, generally cool conditions and pesky moisture, continue to keep farmers at bay. Wisconsin only completed 2% planted to date versus a five-year average of 23%. Michigan (at 3%) was well behind its five-year average of 23%, as was Minnesota at 8% versus a five-year average of 46%. While these states are well behind the average, one has to keep in mind that the northern tier of states rarely plant much, if any, in April.

As the next two weeks of weather unfold, the tone for corn price direction will take hold. December corn has been stuck near $5.00 (give or take a dime) for well over a month. Since January, USDA reports have been friendly for prices since bottoming prior to the USDA report on January 10. After a 65 cent rally, prices have leveled off. The market is not ready to buy into a late-planting concern. If planting continues to lag behind schedule, this could set the stage for potential summer weather to be more impactful.

For corn producers, we believe you should market assuming normal crop conditions. As a rule of thumb, as the end of May approaches, it is good to have sales on and puts to protect the downside. If you are confident in your production capabilities, you may consider going as high as 50% forward sold on expected production and purchasing puts on the other 50%. It is not unusual for the corn market to lose 25% of its value from winter high to fall low. As an example, if corn prices peak at $5.20 on December futures, then a 25% decline would equate to a futures price at $3.90.

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