Yield prospects up, price prospects down for 2012 corn
When USDA’s crop statisticians released their crop progress report earlier in the week, 28% of the crop has been planted, about twice the rate of the past five years. Of course, the warm March weather allowed that to happen, but also put some of that crop in jeopardy on April 11 and 12 when sub-freezing temperatures wilted the earliest planted corn. But that did not destroy the effort of thousands of farmers who ventured into the field in mid and late March.
The odd way that the cold temperatures killed some plants, but allowed adjacent plant to survive was comparable to a thinning process. Producers will have to make a financial judgment of whether enough plants will be viable to keep the field intact, or whether the field should be replanted. There have not been enough reports from throughout the Cornbelt to know whether there will be any widespread replanting. If that happens, the advantage of the early planted crop will be lost.
Although farmers have told USDA they intend to plant nearly 96 million acres of corn this year and the most since 1937, a shortfall of available corn is anticipated late in the summer because of diminished supplies of the 2011 crop. Hence the reason that many farmers took the risk of early planting to capture premium prices anticipated prior to September 1.
When the new 2012 crop is being hauled to the elevator, prices will certainly be much less than they have been, or will be for the early 2012 corn. Instead of the $6.73 that December 2012 futures reached last August, December futures could be closer to the $4 level say market analysts and commodity specialists at universities.
The lower price reflects inventory building believes Dr. Darrel Good at the University of Illinois because of expectations for a very large crop with an abundant carryover when the next marketing year is complete. Even though we are currently consuming more than 13 billion bushels of corn, the potential14.3 billion bushel crop will be more than enough. Good bases that number on current yield projections, which he calls 162.5 bushels per acre as “seeming most reasonable at this time.”
Currently, the long term trend for an average yield is between 161 and 162. But Good is boosting that a bit because the early planting means fewer acres will be planted after the optimum planting date which would otherwise lower the average yield. While the amount of surplus determines the price offered by the market, it originates with the yield, says Dr. Jim Hilker at Michigan State University, “If yields are a few bushels above the trend yield used with normal world yields, corn prices could fall to $4.00/bu. at harvest. However, a yield a few bushels below the trend yield could chase harvest prices back up towards $6.00/bu.”