Corn production uncertainty grows

Cattle Market & Farm Reports, Editorials
Sep 13, 2004
by WLJ
— Freeze damage unknown.
— Near-term prices hinge on USDA report.
By Steven D. Vetter
WLJ Editor

Commodity grain and livestock analysts have both been feverishly trying to figure out if late August and early September reports of early frosts, even a freeze, in several northern tier states were accurate and whether or not 2004 corn crops have been impacted severely, or not. Last Friday's USDA crop production forecast was being eagerly anticipated so that a firm price trend for nearby futures and cash corn markets could be projected.
As of press time last Thursday, commodity firms' guesses concerning the 2004 national corn crop ranged between 10.65-11.3 billion bushels, with an average guess being 10.85 billion. Yield estimates also varied widely, with the range of guesses being 146-154 bushels per acre.
Most market onlookers said that a USDA production figure on the bottom end of, or below, pre-report estimates, could result in corn prices jumping between $2.40-2.60 per bushel, $4.30-4.70 per cwt, through the end of September, and possibly getting up to $2.75-2.80 per bushel, $4.95-5.05 per cwt, in October.
On the other end of the spectrum, a corn production projection nearing or surpassing the 11 billion bushel level could push corn prices back towards the $2 mark, or $3.60 per cwt, if not a little lower, in the immediate future, market analysts said.
Opinions have been mixed on whether or not an early freeze in parts of the Dakotas, Minnesota, and far northern Iowa would be enough to significantly impact the nation's corn harvest this year. Several sources estimating an 11-billion-bushel crop, or larger, said the areas hit by early frost aren't large enough to do much damage to national yields, even when combined together.
In addition, those same people said that a frost is far different from a hard freeze, and that a frost showing outside ice crystals doesn't do any damage to corn ears because the moisture hasn't been allowed to penetrate before being froze.
However, more bearish prognosticators said that cold weather damage to crops was further reaching than originally reported and that some drops in yields were expected to be reported from as far south as parts of central Iowa, and northern Illinois, two of the more prolific corn growing areas in the country.
Jeff Francis, crop commodity specialist with Indianapolis-based F&F commodities indicated that he is leery of early frosts that are in the forecast over the next week or two, in addition to the ones that have already happened.
"A majority of crops aren't as far along as normal, and that includes corn. Moisture has been very plentiful, but temperatures this summer in the central and northern strips of the Corn Belt have been well below normal, and that has slowed the maturity of corn by at least 2-3 weeks, which makes it really susceptible to a September freeze," said Francis.
Last week's crop progress report, released by USDA's National Agriculture Statistics Service (NASS), was indicative of the relative immaturity of this year's corn crop, compared to last year and the past five years. For the week ending September 5, the percentage of corn, nationwide considered "dented" was 61 percent, seven percent below a year ago and 13 percent under the five-year average. Corn that is dented is considered mature enough to endure a freeze and still be far enough along maturity-wise to be considered feed or processing grain.
USDA also said, in last Tuesday's report, that only 17 percent of U.S. corn was "mature," compared with 20 percent the same time last year and 25 percent over the previous five year average.
Francis added that he has heard several reports that winds over the last week of August and first week of September have left three to five percent of Iowa and Illinois corn laying down on the ground, and that could sacrifice yields and overall harvest numbers, too.
"Unless frost and freeze reports were over exaggerated, I can't see corn production being within USDA's August prediction by 150-200 million bushels," Francis said.
While a 200-300 million bushel drop in corn production, compared to previous forecasts, could result in a possible 50-cent jump in prices, some cattle market analysts said that isn't a bad thing because it would force prospective fed cattle sellers to sell their cattle when ready instead of holding onto them hoping for an extra $1-2 the next week. Several analysts have said current cheap corn prices have helped lead to the extra back up in slaughter-ready cattle supplies.
Other feedlot sources said that while the price of feed corn would increase, a drop in feed corn production may actually help them out by providing more silage. Particularly in the central Plains feeding states, silage supplies have reportedly dwindled down to about 25-30 percent of normal, and some early freezes in those areas may force corn producers to ensile their crop rather than risk harvesting it as grain, or even haying it.
Several cattle feeders indicated that getting more silage in would help them manage their cattle supplies better, and slow down the rate at which some cattle are reaching their optimum finishing weights, and do it with less cost than feed grain quality corn. — WLJ