Published on: 10:20AM May 28, 2009
Allendale Inc has identified four years dating back to 1993 when US corn plantings were less than the present 82% as of May 24th. Those years identified have been 1993’s 73% complete, 1995’s 62%, 1996’s 73% and closest to 2002’s 79%. As a source of measure, the present 82% complete compares to year earlier level of 86% and a five year average of 93%.
Allendale Inc explored the potential for late plantings possibly reducing yield and acres harvested from USDA’s initial May supply and demand (WASDE) reports to the following January annual reports. The results were far from surprising. As you are able to witness via this chart, late plantings invariably translates to reduced harvested acres as the crop moves through the season.
The percent range from the May WASDE to January WASDE measured from a 1.8% reduction in 1996 to as great as 9.1% during the great Midwest flood year. The 5.2% reduction in 1995 was largely at the hands of a devastating drought which crippled the crop shortly after it was planted. Closer to the present time table was in 2002 as a wet spring in the east corn belt ultimately shrank harvested acres by 3.8% from May to the January annual report. As you are able to view, USDA was quick to react in reducing harvest acres as soon as one month following its initial May projections.
Also of little surprise was how USDA trimmed yield per acre as the season wore on as viewed in this chart. Three of the four years in question, resulted with a reduction percent range of 5.8% as shown in 2002 to the largest reduction of 18% in 1993, leaving 1995 with 9.5% less yield from the May to January annual report.
Do not forget, USDA already has reduced the projected 2009 yield per acre in its initial May WASDE by 1% vs it Feb 2009 Outlook Forum forecast as a result of delayed plantings. Allendale Inc suggest USDA may have room for further yield and harvested acreage reductions in the upcoming June WASDE and into the January Annual crop production report, potentially pushing 2009 end stocks below the psychological 1 billion bushels support level. If we use 2002 as an example there remains the possibility of witness harvested acres shrinking from 77.8 million to 74.85 million and a yield reduction from the current 155.4 bushels per acre to 146.5. This combination of reduced harvested acres and yield may result in projected 2009/10 end stocks of 1.145 billion bushels reduced to fewer than 72 million bushels. Allendale Inc doubts very seriously USDA and more importantly the corn trade would allow for such historical small end stocks to materialize. Sub 1 billion bushels of corn stocks are likely to be greeted with a corn futures rally which could ration use. Sub 1 billion bushels are likely to cause the present near carry in the Dec to March corn futures to metamorphose into an inverted market. A reduction of near 1 million acres planted and a yield reduction of just one tenth of a bushel will develop such a scenario. Or leave planted acres unchanged and reduce yield per acre by two bushels and a sub 1 billion bushel can develop.
However, many questions do remain and they start with can the impressive west corn belt start to 2009 offset yield losses in the east, can state of the art corn genetics minimize the wet weather yield loss in the east corn belt and is there the potential expanded acres in the west corn belt offset fewer acres planted in the east corn belt? How might these developments impact your old crop and for that fact new crop marketing, or investment strategies?..........Joe Victor
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