Corn Market Decision Time re: Planting Prospects
and
Examining 2019 Kansas Wheat Tour Results
Daniel M. O’Brien, Extension Agricultural Economist-Kansas State University
May 3, 2019
Point #1) Delayed U.S. Corn Plantings in May 2019
The situation with 2019 U.S. corn plantings as of May 3, 2019 is the following. First, as of April 28th the USDA reports that corn plantings are delayed in several key corn producing states in the U.S. Corn Belt – most notably in Illinois (9% vs 43% 5-yr avg), Minnesota (2% vs 24% 5-yr avg), Indiana (2% vs 17% 5-yr avg), and Ohio (2% vs 13% 5-yr avg). Plantings in Iowa, Kansas, Missouri, Nebraska, North Carolina, North Dakota, and Tennessee are also trailing the most recent 5 year average pace, but not a seriously as in IL, MN, IN, and OH. With credible weather service forecasts for significant rainfall over many of these central and eastern U.S. Corn Belt states over the next week, prospects for timely plantings of 2019 U.S. corn acres are declining in a quantifiable manner.
Corn futures markets have not responded to this decline in 2019 U.S. corn planting and associated production prospects. Within the next 1-2 weeks it seems these issues of 2019 U.S. corn planting prospects, how plantings could affect 2019 U.S. corn production, supply-demand balances, and expected corn prices for what remains of the “current crop” 2018/19 marketing year (MY) through August 31, 2019, and for “new crop” MY 2019/20 will all likely have to be dealt with by the corn futures and cash markets.
If the 2019 U.S. corn crop is planted in a timely manner, then it will have fully adequate soil moisture to begin development with – and which could provide for growth from May through June and into July.
However, if instead of the 92.792 million acres (ma) projected for year 2019 by the USDA in the Prospective Plantings report on March 29th, actual 2019 U.S. corn plantings are reduced by 5% down to 88.152 ma, or by 10% down to 83.513 ma, it would likely have significant, tangible, negative impacts on 2019 U.S. corn production.
At its current projection of 92.792 ma planted, 84.723 ma harvested (91.30% harvested to planted acres), and 176.4 bu/ac yields, the USDA is implicitly forecasting U.S. corn production in year 2019 would be 14.945 billion bushels.
However, IF 2019 U.S. corn plantings decline 5% to 88.152 ma, then with 91.30% harvested-to-planted acres, there would be 80.486 ma harvested. And with the same 176.4 bu/ac yield, U.S. corn production would be 14.198 bb – down 747 mb from the initial USDA implicit forecast of 14.945 bb.
In addition, IF U.S. corn plantings are down 10% from the USDA projection to 83.513 ma, then using the same harvested-to-planted acres factor of 91.30% to figure 2019 U.S. corn harvested acres at 76.247 ma, and using 176.4 bu/ac again, then 2019 U.S. corn production would fall to 13.450 bb – down 1.495 bb from the USDA’s initial levels of 14.945 bb 2019 U.S. corn production.
Therefore, either a 5% or especially a 10% reduction in U.S. 2019 Corn planted acres would have significant negative impacts on U.S. corn production in 2019, leading to much tighter U.S. corn ending stocks, and higher cash prices as usage would be rationed on smaller supplies.
Point #2) Examining the Results of the 2019 Kansas Wheat Tour
This week’s 2019 Kansas Wheat Tour projected the 2019 Kansas wheat yield to be 47.2 bu/ac, with an implicit harvested acreage estimate of 6.494 million acres (92.8% harvested-to-planted acres off of 7.000 ma planted), and 2019 Kansas wheat production of 306,500,000 bushels (i.e., 306.5 million bushels or mb). According to KSU Extension Agronomist Romulo Lulato ( lollato@ksu.edu), the Kansas wheat crop is 3 to 4 weeks behind normal in maturity, with the next month being crucial to crop development and possible disease threats.
Since year 2014, the annual Kansas Wheat Tour has UNDER-forecast Kansas wheat production by 10.4% (in 2015), 18.2% (in 2016), 15..6% (in 2017), and 12.3% (in 2018). The reason for this under estimate of Kansas production in recent years has been a combination of underestimated yields, and especially low projections of harvested acreage. During the years 2011-2018 period the Kansas Wheat Tour underestimated final Kansas wheat harvested acres each year, ranging from 4% too low in 2016 to 13.7% in 2011. For instance, in 2018 Kansas harvested acres of wheat were implicitly forecast to be 6.576 ma, but ended up being 7.300 ma as estimated by USDA. Following the same trend, it is possible the implicit harvested acreage of 6.494 ma for wheat in Kansas for 2019 could end up being too low.
Finally, total Hard Red Winter (HRW) wheat production in the central and southern plains states of Nebraska, Colorado, Kansas, Oklahoma and Texas is forecast to be 638 million bushels (mb) in 2019, up from 523 mb for these states in 2018, but comparable to 635 mb in 2017, 870 mb in 2016, and 655 mb in 2015. The 2019 forecast for Texas came from KSU Calculations, while those for Kansas, Nebraska, Colorado, and Oklahoma came from the 2019 Kansas Wheat Tour.
An additional factor to watch as the 2019 Kansas wheat crop develops will be the levels of protein and/or other quality factors. It is likely that significant amounts of the high protein / good quality 2018 Kansas wheat crop likely still in storage in Kansas grain elevators. As a result, IF the 2019 Kansas wheat crop were of lower protein / quality, THEN it is likely that carryover supplies from the higher protein/higher quality 2018 crop would be blended with the 2019 crop to enhance marketability.
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Grain market summary notes, charts and comments supporting the Weekly Grain Market Review from KSU Ag Economics presented in the KSU Agriculture Today radio program to be played on Friday, May 3, 2019 are available on the Kansas State University www.AgManager.info website at the following KSU web address:
http://www.agmanager.info/grain-marketing/grain-market-outlook-newsletter
The recorded radio program will be aired at 10:03 a.m. central time, Friday, May 3, 2019 on the K-State Radio Network (KSU Agriculture Today Radio) – web player available. A copy of the April 26th recording is be available at the KSU Agriculture Today website at this time.
Following are sections of the Working notes for this week’s radio program up on the KSU AgManager.info website…
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