April 26, 2018
Business Latest News | Poll Questions | Eugene Cole | EMHS | Turkey Hunt

Corn crop delays signal price gain as farmers switch to soybeans

By Whitney McFerron, Bloomberg News

CHICAGO — Corn farmers are running out of time to plant this year’s crop after wet weather swamped fields from North Dakota to Ohio, signaling higher costs for livestock and ethanol producers as growers switch to soybeans.

About one-fifth of the corn crop had yet to be sown as of May 22 in the United States, the world’s top producer and exporter, government data show. In Ohio, where some areas got 10 inches of rain in the past month, the pace of seeding was the slowest in 15 years. Fields planted after mid-May yield less, while soybeans can be sown until late June.

“I have not planted the first kernel,” said Fred Yoder, a farmer in Plain City, Ohio, who may switch to soybeans if fields don’t dry out by next week. Soggy fields are the norm in central Ohio, Yoder said. “A few guys have tried to mud in some corn, but the stuff that has been planted looks horrible.”

Corn futures doubled in 12 months, boosting feed costs for meat producers including Tyson Foods and ethanol makers such as Archer Daniels Midland. Prices may reach a record $8 a bushel, said Jeff Sherman, a commodities portfolio manager at DoubleLine Capital. Goldman Sachs said farmers are unlikely to meet the USDA’s March planting forecast of 92.2 million acres, which would be the second-largest since World War II.

World grain output is being threatened by adverse weather, from droughts in China and Europe to excess moisture in the U.S. and Canada.

Tightening supply and rising demand helped boost global food prices in nine of the past 10 months, including a record in February, United Nations data show. Companies including Nestle, McDonald’s and Wal-Mart Stores are passing along more of their costs to customers.

While U.S. planting has advanced near the normal pace in Iowa and Illinois, the biggest corn- and soybean-growing states, smaller producers including Ohio, Indiana and North Dakota are lagging behind because fields were muddied by record rains in the Ohio Valley, flooding along the Mississippi River and a wet spring in northern states.

Ohio, the eighth-biggest corn grower last year, is the furthest behind, with only 11 percent of fields sown as of May 22, compared with an average pace of 80 percent, USDA data show. The department will update the nation’s crop progress on May 31 in Washington.

Yoder, who last year at this time completed sowing his corn crop, said he’s never seen delays this long in 38 years of farming.

As much as 2 million acres of corn are “at risk” of not being planted because of wet weather, Goldman said in a May 24 report. Lost output from that land would cut U.S. stockpiles by as much as 317 million bushels before the 2012 harvest, leaving the smallest ending stockpiles since 1996 for the second straight year, the New York-based bank said.

“There have been long-term global dynamics in play that are causing crops to fall short, and the flood situation in the U.S. is going to be a part of that,” said Sherman, who helps manage more than $11 billion at Los Angeles-based DoubleLine Capital. “It’s really hard to see the crop meeting the USDA projections. You’d have to hit nirvana for that to be the case, and we’ve had this massive crop destruction.”

The USDA on May 11 forecast that global output in the 2011/2012 crop year would jump 6.4 percent, more than enough to meet rising demand after harvests the previous year fell short of consumption. Corn, used mostly in livestock feed, is increasingly processed to make fuel, with a record 5.05 billion bushels going to make ethanol next year, or about 37 percent of projected U.S. production, according to the USDA.

States including Ohio and North Dakota are more important than usual this year because the USDA had been counting on fringe areas to pick up much of the expansion in U.S. production, said Frayne Olson, a crop economist at North Dakota State University in Fargo. In March, the USDA estimated that planting in North Dakota would jump by 22 percent from 2010. Instead, the 2011 crop may be little changed at 2.05 million acres, Olson said.

“In a normal year, a slight increase in yields in Iowa would offset what we lost in North Dakota,” Olson said. “But today, everyone is counting every bushel, even on the margins. A bushel up here is counting more heavily than it used to.”

Many acres originally slated for corn or spring wheat, which is also delayed in North Dakota, may be used for soybeans, he said. Other farmers may opt to make insurance claims. In most areas of the state, growers were eligible for prevented-planting insurance on corn as of May 25, he said.

U.S. corn planting may total 89 million acres, down 3.4 percent from the government forecast, Olson said. The shift by farmers means soybeans may jump to 78 million acres this year rather than the decline predicted by the USDA, and spring-wheat planting may drop as low as 13 million acres, compared with the government forecast of 14.427 million, he said.

“Will soybean prices be pulled up because corn prices are going up, probably yes,” Olson said, without providing forecasts. “But they’re not going to go up nearly as rapidly as corn prices would. They will lag behind.”

Corn production also may decline along the Mississippi River and its tributaries. Floods swamped almost 3.6 million acres of cropland along the river this month, according to estimates from the Washington-based American Farm Bureau Federation.

In Arkansas, as much as 300,000 acres of rice and 100,000 acres of corn may be used instead for soybeans, said Jeremy Ross, an agronomist at the University of Arkansas in Little Rock.

“Every day, fewer and fewer guys are planting corn and rice,” Ross said. “We’re getting to a point where beans are just about the only option to plant.”

Rising crop prices are expected to send U.S. farm income to a record $94.7 billion this year, according to the USDA. Those profits won’t come if farmers can’t plant fields.

“We’re out doing flower beds for our wives and trimming shrubs, doing goofy stuff to stay busy, because we’re chomping at the bit to get in the fields,” said Yoder, the Ohio farmer. “It’s very frustrating.”

Have feedback? Want to know more? Send us ideas for follow-up stories.

You may also like