Traders ignoring risks to corn crop

Published on: 10:35AM Apr 22, 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 start of another strange growing season.

It really is a story of the "haves" and "have-nots" when it comes to good weather to stick some seed in the ground already this year. East of the Mississippi River, soils are wet... way too wet. Some areas were close to "go time" last Saturday, but (of course) it rained again. As of April 19, Illinois had just 1% of the corn crop planted -- which is way behind the five-year average planting pace of 23% done by that time. Indiana didn't have any of the corn crop planted, behind the five-year average of 9% done.

West of the Mississippi River, some significant progress has been made -- probably even much more than indicated by Monday's Crop Progress Report. It showed Iowa had 6% of the corn crop planted, behind the five-year average of 10%. Nebraska had 3% of the crop planted, behind the five-year average pace of 6%. However... I'm hearing some Iowa growers have plowed forward at a faster-than-normal planting pace. Some 1,000-acre-plus corn growers around Ft. Dodge (north-central Iowa) are even reportedly about to finish up planting corn. A little further south in central Iowa, some growers will be planting beans by this weekend.

In northeast Iowa, corn planters are kicking up dust -- from the guys that have decided to get started. Many growers in the area haven't started yet because they simply don't feel the urgency to get started. Soil conditions are nearly perfect for planting, but are still a little cool. A Bremer Co., Iowa, corn grower even told me, "You know... we could sure use a half-inch of rain."

I'm sure growers in Illinois and Indiana that read that comment are saying to themselves, "Be careful what you ask for!"

So, what will next Monday's Crop Progress Report look like? West of the Mississippi, planting progress will very likely be back close to the five-year average. On April 27, 2008, Iowa had a five-year average planting pace of 33%. That included a 12% completion pace on April 27, 2007 -- but (obviously) did not include the 3% that was planted on April 27, 2008. So, the five-year average planting pace for Iowa will be less than 33%. Here's what Iowa's planting progress in the last five years look like:

April 25, 2004: 36% planted
April 23, 2005: 15% planted (April 30, 2005: 49% planted)
April 23, 2006: 26% planted (April 30, 2006: 63% planted)
April 27, 2007: 12% planted
April 27, 2008: 3% planted

Using the progress from April 23 in 2005 and 2006, the five-year average planting pace would be 18.4%.
Using the progress from April 30 in 2005 and 2006, the five-year average planting pace would be 32.6%.

When the dates don't line up exactly, USDA "massages" the data to line up the dates. With Monday's Crop Progress Report being "as of April 26," the above progress points will be adjusted to "as of April 26" in each of those years. With that in mind, look for the five-year average planting pace in Iowa as of April 26 to be about 26% to 28%.

With Iowa's corn planting progress at 6% as of April 19, the progress that's been reported to our office certainly suggests Iowa will be back on the five-year average planting pace. That, however, will not be true east of the Mississippi. Growers there are sitting and waiting for the ground to "get fit" to plant. Illinois, Indiana and Ohio will be way behind the five-year average planting pace in Monday's update.

What will be the market reaction? Pro Farmer Sr. Market Analyst Brian Grete said it best in last week's Pro Farmer newsletter. "Simply," said Brian, "traders remember what happened last year." Slow plantings, terrible growing conditions and the crop still managed a 153.9 national average yield.

But, as much as they remember what happened early last year, Brian says traders are also choosing to ignore -- consciously or subconsciously -- that the 2008 corn crop was blessed with an extra two or three weeks of excellent growing conditions at the end of the growing season. Obviously, there's no guarantee the sure-to-be-late-planted eastern Corn Belt corn crop will get the "right conditions" later this year to offset the growing season the crop is missing out on right now.

So, for now... traders will assume the crop will get planted. They'll assume the crop will make up for the time it's missing right now. They'll continue to base day-to-day trading decisions on what's happening with the U.S. dollar, crude oil and the stock market -- and they'll continue to ignore the risks to the corn crop. For now...