December 2013 corn futures have traded from a low of $5.12 to a high of $5.735 since mid-May as production uncertainty continues due to late planting in several key areas, according to University of Illinois Agriculture Economist Darrel Good.
Nationally, an estimated 46 percent of the crop was planted as of May 15, compared to an average of 72 percent in the previous 34 years. The largest percentage of the acreage remained unplanted as of May 15 since 1995, and an estimated 9 percent of the acreage was still to be planted as of June 2.
"Expectations for the estimates of planted and harvested acreage of corn appear to be in a wide range for at least two reasons," said Good. "First, some analysts reportedly think that the USDA's March survey of prospective corn plantings resulted in an under-estimate of farmers' actual planting intentions. Under normal planting conditions, some would have expected to see a larger estimate in the June report.
"The second and more important reason for the wide range of expectations stems from late planting," said Good. "Estimates of the number of acres that were intended for corn that have been or will be switched to another crop, or not planted at all, vary considerably. The June 28 report will shed some light on that issue, but the larger-than-normal amount of unplanted acreage during the survey period suggests the report will still reflect intentions in some cases."
The price implications of unfolding production prospects will need to be evaluated in terms of the expected size of the market for U.S. corn during the 2013-2014 marketing year. In the May 10 WASDE report, the USDA projected the size of the market at 12.92 billion bushels under conditions of ample supplies and moderate prices. That projection is 1.785 billion bushels larger than expected consumption during the current marketing year characterized by small supplies and high prices.
Large increases in consumption are expected in each major category of use - ethanol, exports, and feed and residual use. The largest percentage increase (73 percent) is expected for exports while the largest absolute increase (925 million bushels) is expected for feed and residual use. At 5.35 billion bushels, the projection of feed and residual use is the largest since 2007-2008. The large projection reflects an expected increase in livestock feeding rates, not an increase in the number of grain consuming animal units. The expected higher feeding rate reflects a combination of lower feed prices and larger residual use associated with a very large crop. The projection appears generous and the forecast of residual use would likely decline with a smaller crop forecast, even if prices are at the projected level
According to Good, a large number of acreage, yield, consumption and price scenarios are still possible at this time. "What's important is that there is room for a much smaller crop than the early prospects of 14 billion bushels before rationing would be required during the upcoming marketing year," said Good. "A crop of 13 billion bushels would be sufficient to meet expected needs at current new-crop price levels. If harvested acreage is near 85.5 million acres (4 million below the early forecast), as an example, a crop of that size would require an average yield of 152 bushels, about 10 bushels below trend value."