Has It Stopped Raining Yet?
11/12/2009 10:31AM
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Weather has been the big story for October. Between the freezing temperatures, early snow, and the steady flow of storms across the state, Iowa crop producers have not enjoyed the last month. The late maturing crop faced a freeze that was about a week earlier than average. Areas of the state were blanketed by the 1st
measurable snowfall of the season, well before average. Typically in October, Iowa receives on average 2.5 inches of precipitation. In 2009, precipitation levels ranged from 4 to 8 inches in the month. This combination of weather has brought production expectations and delayed harvest progress. Figure 1 shows harvest progress for U.S. and Iowa corn and soybeans and compares this year’s progress with the year of the slowest harvest between 1985 and 2008. As the graphs show, the 2009 harvest in the U.S. is the slowest of the past 25 years. The story is similar for Iowa crops. The corn harvest is behind the previous slowest year (2008), while the soybean harvest is just ahead of the pace in 1985. Hopefully, conditions will improve, allowing fields and crops to dry out and combines to roll.
Before the freeze and harvest delays, USDA had estimated national corn and soybean yields at 164.2 bushels per acre and 42.4 bushels per acre, respectively. Iowa yields were estimated at 188 bushels per acre for corn and 52 bushels per acre for soybeans. The mid-October cold snap likely took the top off of these estimates.
And while Iowa crop yields will be reduced, larger reductions will be concentrated in the eastern Corn Belt as the corn and soybean crops there were further behind in development. Pre-freeze, USDA projected this year’s crop as the 2nd largest corn crop at 13 billion bushels and the largest soybean crop at 3.25 billion bushels. Postfreeze, we are probably still looking at the 2nd largest corn crop and a soybean crop in the top five. But quality concerns are building with the harvest delays. The wet conditions have not allowed the crops to dry out and crop moisture levels are running higher than most would like. Also, areas that experienced hail damage this year are seeing increased mold pressures as well. Corn stock rot has been an issue in the southern U.S. And the U.S. Corn U.S. Soybeans Iowa Corn Iowa Soybeans late season rains are rehydrating some soybean fields and increasing the likelihood of pod splitting. Farmers and elevators are facing additional drying costs again this year. The supply chain is dealing with having two high moisture crops in a row.
While the supply side has been significantly impacted by the weather, the demand side has been helped by outside influences. Corn demand via ethanol was raised again for the 2008 crop, to 3.7 billion bushels. The outlook for the 2009 crop is for 4.2 billion bushels to head to ethanol facilities. Crude oil prices have risen to the upper $70s per barrel range and this has helped ethanol margins remain positive over the past few months. Based on ethanol production during the 1st seven months of 2009, annual production will be roughly 10.8 billion gallons. Corn feed and residual demand is projected at 5.4 billion bushels, up 50 million from last month and up 169 million from last year. Corn export demand is estimated at 2.15 billion bushels, down 50 million from last month but up 292 million from last year. Continued weakness in the dollar is supporting the export outlook. USDA’s latest projections show the dollar’s slide continuing through the end of the calendar year. Figure 2 displays export sales so far this marketing year. Current corn export sales pace is just ahead of last year.
For soybeans, domestic crush demand is projected at 1.69 billion bushels, held steady from last month but up 28 million from last year. Projections of increased soybean oil and meal exports are supporting the crush outlook. But the big story for soybeans continues to be export demand, especially from China. USDA increased its export estimate to 1.305 billion bushels. This would top last year’s record. In fact, the early sales pace has been very strong. As Figure 2 shows, soybean export sales have actually exceeded corn sales this year. China has already booked over 500 million bushels of U.S. soybeans. To put that in perspective, that amount is roughly the amount of soybeans Iowa producers are projected to grow this year. From their early October outlook, USDA had projected ending stocks for corn at 1.672 billion bushels, roughly the same level as last year. Soybean ending stocks were estimated at 230 million bushels, up 92 million bushels from last year.
Season-average prices were projected at $3.35 for corn and $9.00 for soybeans. The cold snap and the resulting reduction in supply will likely lower the ending stock projections and raise expectations for prices. The futures markets have reacted strongly to the freeze and harvest delays. Corn prices rose over 50 cents per bushels, while soybean prices gained over a $1 per bushel. The outlook for better harvest weather has taken some of these gains out, but prices remain above last month’s levels. Current futures prices point to season-average prices around $3.50 per bushel for corn and $9.30 per bushel for soybeans.
Source: Iowa State Ag Extension