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May 2009 Archive for Chip's Chore Time

RSS By: Chip Flory, Pro Farmer

Chore time for me isn't what it used to be when I was growing up on our eastern Iowa farm. In fact... I don't even have horse chores to do any more!

Corn living on the edge

May 18, 2009
Chip Flory

 

Chore time for me isn't what it used to be when I was growing up on our eastern Iowa farm, but taking care of two horses in the morning before I head in for work gives me a little time to think about the day ahead. Each morning, stop at this spot to get a feeling for the "tone of the day" - and some attitude about agriculture and the markets.

I was thinking…

... about the May Supply & Demand Report from USDA.

I know... that was almost a week ago, but it seems like the market is still trying to figure out exactly what it means for new-crop corn futures. USDA used the planted acreage estimate from the Prospective Plantings Report and a historical harvested acreage percentage. Then, instead of just going with a trendline yield, USDA trimmed a bit from the trendline to account for snail's-pace planting progress in the eastern Corn Belt.

The result was a corn crop basically even with year-ago. But... if the March corn planting intentions estimate was on the mark, actual corn plantings will end up less than 85 million. If USDA's May harvested acreage projection was even 1 million acres too high, that could trim another 155 million bu. from total 2009-10 supply. Holding USDA's May usage projections steady, that would drop carryover to about 1 billion bushels. Of course, we can't assume steady use if the crop is 155 million bu. below the May projection... price would have to rise to slow the usage pace. Most likely, the market would pry some additional use from the Feed & Residual component and from exports. Corn-for-ethanol use seems to be fairly well locked in at about 4.1 billion bushels for 2009-10.

So... let's say the market is trying to factor in corn plantings 1 million acres below the March intentions. Now let's drop the national average yield just 1 bu. from USDA's May projection of 155.4 bu. per acre. That would drop about 76.8 million bu. from the crop (let's just call it 75 million bushels). The combination of 1 million fewer planted corn acres and a 1 bu. per acre drop in the national average yield from the May projection would trim about 225 million bu. from the 2009 corn crop. That heightens the need for price rationing to slow total corn use just to keep 2009-10 corn carryover near 1 billion bushels.

The point I'm trying to make is the new-crop corn market is once again living right on the edge of a dangerously low corn carryover. After price action on May 18, it seems traders are starting to factor in the risk of a smaller-than-needed 2009 corn crop.

H1N1 impact still lingering

May 06, 2009
Chip Flory

 

Chore time for me isn't what it used to be when I was growing up on our eastern Iowa farm, but taking care of two horses in the morning before I head in for work gives me a little time to think about the day ahead. Each morning, stop at this spot to get a feeling for the "tone of the day" - and some attitude about agriculture and the markets.

I was thinking…

... I'd share some of the coverage we had on H1N1 flu in last week's Pro Farmer newsletter. We're planning plenty of followup coverage in this week's newsletter, but what we had last week is still good perspective for the marketplace.

Fortunately, some of the hysteria over H1N1 is starting to fade, but the unfortunate and undeserved attachment to the hog market is lingering -- and will continue to linger. Here's the coverage from last week's Pro Farmer. To learn more about Pro Farmer newsletter, drop me a note or call 1-800-772-0023.

"The outbreak of H1N1 influenza with its epicenter in Mexico first carried the unfortunate name of “swine flu.” Global reaction was as should have been expected — uneducated and knee-jerk.
 

"The National Pork Producers Council and USDA Sec. Tom Vilsack were quick to act to educate the masses... and most in the media (at least those willing to be educated) now thankfully refer to this flu outbreak with a biological classification — H1N1. (Unfortunately, that is also a general influenza classification... which could also add confusion.)
 

"Egypt gets the trophy for the most uneducated reaction. It ordered extermination of all 300,000+ hogs in the country, despite the fact the herd was free of H1N1 and there are no human cases, either!
 

"Next on that list are the countries that banned imports of pork from countries with confirmed human cases of H1N1, including pork from the United States. Iindustry reaction, down to individual producers, is outrage; traders’ reaction to the pork import ban was to aggressively sell lean hog futures.

"Treat the symptoms, wait for recovery —

"Not only is that how to handle an H1N1 infection, it’s also all we can do with its impact on the hog market. Treatment has started — even the World Health Organization has officially adopted “H1N1.” The next treatment is for Vilsack and U.S. Trade Rep. Ron Kirk to pursue all avenues to remove restrictions on global pork trade.

"Most importantly, it will simply take time to cure the hog market’s ills associated with H1N1 flu. How long will it take? We’re dealing with human perceptions — which means it’s exceptionally difficult to predict how long the hog market will be dealing with a negative attachment to this disease. But, it won’t likely be a “quick” cure."


 

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