October 20, 2009

The US Department of Agriculture confirmed Monday (October 19) that the US corn and soy harvests advanced only marginally last week, reflecting the impact of unfavourable cool, wet weather.

 

The sluggish pace of harvest should continue to lend support to Chicago Board of Trade corn and soy futures as traders worry about potential risks to the crops, analysts said. Harvest progress came in at the low end of trade expectations.

 

Winter wheat planting also remained behind schedule, the USDA said in its weekly crop progress report. Producers in parts of the Midwest and South must wait to harvest soy before planting soft red winter wheat.

The US corn harvest was 17 percent complete as of Sunday, up just four percentage points from a week earlier and below the average of 46 percent, the USDA said. That was at the low end of trade expectations, which ranged from about 16 percent to 20 percent complete.

 

The slow harvest "would have to be supportive" to CBOT corn futures, said Sid Love, analyst for Kropf & Love Consulting. The grains and soy rallied Monday on expectations that wet weather will continue to delay the harvest.

 

This year's corn harvest is behind the prior recent low harvest record of 22 percent in 1992 for this time of year and is less than half the average pace of 46 percent, noted Rich Feltes, senior vice president of research for MF Global. Last year, when development was delayed by late planting, harvest was 28 percent complete at this point in time, according to the USDA.

 

"There are 3.8 billion bushels of corn that should be harvested that aren't - the corresponding number for soy is 1.365 billion bushels - all at a time of record [first-quarter crop year] US soy demand and a relatively tight US corn pipeline," Feltes said in a note. Demand for soy has been high because of export demand from China and production problems in South America.

 

Iowa's corn crop was 10 percent harvested as of Sunday, up from 6 percent last week and down from the average of 33 percent, the USDA said. In Illinois, harvest was 11 percent complete, up from 6 percent last week and down from the average of 68 percent. Indiana's crop was 15 percent harvested, compared to 10 percent last week and the average of 49 percent.

 

Corn was 83 percent mature, compared to 74 percent last week and the average of 97 percent, according to the USDA. The crop's good-to-excellent rating remained unchanged from last week at 70 percent.

 

The soy harvest was 30 percent complete as of Sunday, up seven percentage points from a week earlier and down from the average of 72 percent, the USDA said. That was at the low end of trade expectations of 30 percent to 35 percent complete.

 

The slow harvest pace should lend support to CBOT soy, "particularly with the weather coming in," Love said. A "long-lived window of drying for rapid harvesting" shouldn't develop for 10 days as rain this week should be followed by another strong storm system next week, according to a late forecast from T-Storm Weather.

 

In Iowa, harvest was 37 percent complete, up from 29 percent last week and down from the average of 85 percent, according to the USDA. In Illinois, the crop was 13 percent harvested, up from 10 percent last week but below the average of 79 percent. Indiana's harvest was 27 percent complete, up from 19 percent last week and the below the average of 72 percent, the USDA said.

 

Soy is basically fully mature, with 95 percent of the crop dropping leaves, compared to the average of 97 percent, the USDA said. The crop's good-to-excellent rating was unchanged from last week at 65 percent.

 

Winter wheat was 69 percent planted as of Sunday, up five percentage points from a week earlier and below the average of 78 percent, the USDA said. The crop was 48 percent emerged, compared to 39 percent last week and the average of 54 percent.

 

Little progress was made in soft red winter wheat states as many producers must harvest soy before they can plant wheat, analysts said. SRW wheat is planted after soy throughout the Midwest and South.

 

In Ohio, planting was 44 percent complete, compared to 39 percent last week and the average of 75 percent, according to the USDA. In Illinois, planting only advanced by one percentage point from last week to 13 percent, which was below the average of 67 percent, the USDA said.

 

Even Kansas, the top hard red winter wheat-growing state, struggled to advance planting. The state's crop was 73 percent seeded, up from 70 percent last week but below the average of 83 percent. SRW wheat is used to make pastries and snack foods, and HRW wheat is used to make bread.

 

SRW wheat acres are projected to fall due to the slow soy harvest and weak cash prices. Producers in the Midwest and South also have more options for planting than they do in the central and southern Plains, where HRW wheat is grown, analysts said.

 

US wheat futures will likely follow along with strength in CBOT corn and soy, Love said.