March 21, 2012

 

US corn crop prices for 2012 seem low enough

 

 

US new-crop corn prices are "probably low enough", estimated leading farm academics, saying that a warm start to the US spring, with temperatures more typical of June, will not certainly translate into larger harvest.

 

The best bet for the corn crop is a trend yield, calculated at just under 160 bushels per acre, despite noting expectations that a mild winter, and rapid start to spring field work, mean this year's corn "will be planted in a very timely fashion", the University of Illinois said.

 

While acknowledging a "general perception" that early sowings mean higher yields, Corn Belt research reveals "a slight yield penalty for extremely early planting", i.e., March sowings.

 

"While there is a clear yield penalty for late planting, there not a similar yield premium for early planting," Professor Darrel Good, agricultural economist at the university, said.

 

Conversely, the university also warned against expecting a stretch in sowings, forecast to hit their highest since World War II this year, to mean a dent to yields from plantings being extended into less viable areas.

 

"Some of the increase in corn acreage may occur in the higher-yield areas of the eastern Corn Belt since acreage there in 2011 was below the recent peak of 2007," Professor Good said.

 

Nonetheless, the forecast for a sub-160-bushels-an-acre yield, below the USDA's forecast of 164 bushels per acre, means that this year's crop should come in 350-435 million bushels lower than the government is expecting.

 

This "would suggest that new crop corn prices are probably low enough", he said.

 

Chicago's December 2012 corn contract, which hit a high of US$6.67 a bushel on August last year, closed at US$5.70 a bushel on Monday (Mar 19), down 0.7% on the day.

 

The contract is down 2.7% so far in 2012, underperforming the near-term May lot, which has gained 1.3%.

 

The comments come amid an unusually mild start to the spring the US Midwest, with Sunday temperatures "remarkably warm across all of the Plains and the Midwest, with temperatures in the upper 70s Fahrenheit to Middle 80s from the Rockies to the east coast", WxRisk.com said.

 

At Martell Crop Projections, Gail Martell said that average daily temperatures in the Midwest "are running 30 degrees Fahrenheit [17 degrees Celsius] above normal, more typical of early June".

 

"Already soil temperatures are above the 50 degrees Fahrenheit threshold for corn germination, even 4-16 inches deep," Martell said.

 

And temperatures are expected to stay above normal for at least the next 10 days, WxRisk.com said.