US Corn Planting Jumps Despite Rain07 May 2012
The March Prospective Plantings report indicated US farmers were looking to bring a lot of area into corn production. And the pace of planting thus far shows they are well on their way to planting more area to corn than we have seen since the 1930s.
Figure 1 outlines the progress this year and shows the range over the past 32 years. The southern and eastern Corn Belt got off to an early start and haven’t really looked back since then.
While the northern and western Corn Belt has been somewhat delayed by some needed moisture, progress there has also picked up. Nationwide, 53 per cent of the corn crop had been planted by Apr. 29th. That is 26 per cent above the 5-year average and 41 per cent ahead of last year’s pace.
The rapid planting pace has pressured the corn market. Since 1980, two corn crops have had planting progress that was advanced this much or more at the first of May, 2004 and 2010. The 2004 crop set a record yield, which was topped five years later.
The 2010 crop started off well, but higher nighttime temperatures in July and August limited yields. In three other years (2000, 2005, and 2006), corn plantings had reached the mid-40s by Apr. 29th. In each of those years, corn yields slightly exceeded the long-run trend.
Figure 2 shows the actual corn yields since 1980 and the yield trend over that period. Looking across the combination of years with planting progress like this year, the average resulting yield is 3.6 bushels per acre above the long-run trend.
The planting progress in Iowa jumped dramatically in the past week. Roughly half the corn crop has been planted. That’s 18 per cent ahead of the 5-year average and 43 per cent ahead of last year. Over the past 32 years, Iowa’s corn planting pace has been faster 7 times, with the record being 77 per cent in 2010.
Out of those 7 years, Iowa experienced above trend-line yields in 5 years. The exceptions were in 2000 and 2010. The average yield bump for the earlier planting has been 6.2 bushels per acre.
Figure 1. US Corn Planting Progress (Source: USDA-NASS)
Figure 2. US Corn Yield Comparisons to Trend
That rapid planting pace is carrying over for soybeans as well. As of Apr. 29th, 12 per cent of the national soybean crop was planted. That is 8 per cent ahead of the 5-year average. At this point last year, there had basically been no soybean planting. Again, the southern and eastern states lead the way. Illinois, Indiana, Ohio, Arkansas, and Mississippi are all well ahead of their average soybean planting pace. Iowa is currently on the 5-year average. So the 2012 crop season is off to a roaring start.
Looking at pricing for the 2012 marketing year (Sept. 1, 2012 to Aug. 31, 2013), current futures prices are offering strong prices for both crops. And what had been a sizable return advantage for corn has shrunk to nearly an even tradeoff between corn and soybeans. Figure 3 shows the evolution of projections for the 2012/13 season-average prices for corn and soybeans based on futures prices.
As the graphs show, the corn market has been slowly working its way downward on the news of large plantings and has recently honed in on the $5.25 per bushel price range. Soybean prices, which had been trending lower last fall, rebounded with the renewed interest from China. That demand pull and projected drop in acreage has sustained the soybean price run up. Currently, the futures-based projection for the 2012/13 soybean season-average price is over $13 per bushel.
If that holds, soybeans will set another record for the season-average price. Based on ISU Extension production cost estimates, both crops have prices well in excess of estimated production costs. The 2012 crop year is shaping up to be another profitable crop year. Given trend-line yields with these prices, corn and soybeans could return $100-150 per acre above production costs. Those types of returns for soybeans have inspired talk that some acreage may shift back to soybeans, instead of going to corn. On average over the past 20 years, roughly 1 million acres of ground originally intended for corn ends up planted to soybeans. Usually, it’s Mother Nature that forces such a crop shift due to delays in planting. This year, finances might do that work.
Figures 3 and 4. Futures-based Season-average Price Projections
Further ReadingYou can view the full report by clicking here.