Corn Sellers: Do you remember that sinking feeling you had on March 28 when USDA released its quarterly Grain Stocks Report that showed larger-than-expected stocks and corn futures closed limit lower? Before the reports’ release that day, July CME Group corn futures were trading around $7.15/bu (Figure 1). They closed the day locked limit lower at $6.76/bu. The next week, July futures had worked down to lows around $6.17/bu and, after a brief short covering rally, found new lows at $6.14/bu in the third week of April. So, in about a one week time period, corn price dropped about $1/bu, leaving many with unpriced old crop bushels and few sales made for the 2013 new crop.
Despite the market’s extreme volatility, perhaps it is a bit forgiving in way. Last week, spurred by late planting concerns, July corn futures rose by $0.415/bu. The majority of the weekly change was attributed to the limit up increase (+$0.40/bu) on Monday, April 29 due to weather forecasts calling for precipitation across much of the Corn Belt. While eastern areas of the Corn Belt were already too wet, western portions of the Corn Belt that needed the moisture received much of it in a late April/early May snow storm. Regardless, corn planting progress was significantly slowed this last week, and will continue to be in many areas this week as well. USDA reported only 5% of the nation’s corn crop planted as of April 28, well behind the previous 5-year average of 31% and last year’s rapid planting pace of 49% by April 28.
I find a several things interesting about last week’s corn market trade. First, the market’s attitude seemed to be that not having a large majority of the crop planted by May 1 would be a disaster. While early planting typically provides the opportunity for exceptional yields, the statistical correlation between planting progress at this time of year (late April and early May) and final national yield is relatively low. Generally, it takes getting into late May before the statistical odds of a lower national yield by late planting increase. Additionally, the moisture (even snow) is welcomed in most areas of the western Corn Belt which is still suffering from drought. At some point in the near future, the market might remember another catch-phrase it likes to trade: “Rain makes grain.”
Second, even though traders are coming to understand how quickly corn can be planted in the U.S., the huge technological changes in planting equipment and tillage systems allows for planting to occur quicker than ever, if weather and field conditions are right. Planting progress data from last year suggests that nationally at least 25% of the corn crop can be planted in a seven day period. In key corn growing states, a much larger percentage of the crop can be planted in a week. Thus, it would seem that there is still the opportunity plant the nation’s corn crop by mid-May and not greatly impact national yield.