SEATTLE () -- This week's U.S. Department of Agriculture crop condition report showed a decrease in corn crop conditions across the U.S. as the Midwest copes with flooding conditions not seen since 1993. Ag professionals, traders and farmers are anxious to see just how much corn has been lost.
The USDA said 95% of corn seeds have emerged as of June 15, compared with 100% a year ago. Among 18 selected states, the national corn crop condition decreased to 3% very poor, 9% poor, 31% fair, 48% good and 9% excellent from 2%, 7%, 31%, 50% and 10%, respectively, last week.
"This could be viewed as bullish, though it is likely that some traders were looking for more," Darin Newsom, DTN senior analyst, told RI.
Iowa saw a sizeable drop to 4% very poor, 11% poor, 36% fair, 42% good and 7% excellent from 2%, 8%, 34%, 47% and 9% the week before. Due to floods in the nation's top corn producing state, some analysts estimate a loss of 1 million to 3 million acres of corn production, about 7% to 21% of overall production.
According to a poll by Farm Futures magazine, at least 3.3 million acres of U.S. corn have been lost to rain and floods. The poll, however, was conducted online from June 6-13 and not considered a scientific estimate.
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Corn: Crop Condition by Percent, Selected States, Week Ending Jun 15, 2008 -------------------------------------- State : VP : P : F : G : EX -------------------------------------- : Percent : CO : 5 8 28 33 26 IL : 5 12 35 43 5 IN : 6 12 27 44 11 IA : 4 11 36 42 7 KS : 2 9 37 48 4 KY : 0 4 16 54 26 MI : 1 4 19 52 24 MN : 1 5 31 57 6 MO : 3 12 40 39 6 NE : 1 6 27 55 11 NC : 6 11 26 54 3 ND : 1 9 33 50 7 OH : 3 8 28 46 15 PA : 0 4 19 56 21 SD : 1 5 28 58 8 TN : 0 1 14 58 27 TX : 7 13 39 36 5 WI : 3 7 30 49 11 : 18 Sts : 3 9 31 48 9 : Prev Wk : 2 7 31 50 10 Prev Yr : 2 6 22 53 17 -------------------------------------- |
Newsom said it is interesting to note that the decrease from two weeks ago is identical to the decrease seen in 1993 two weeks beyond the onset of flood conditions that year.
Storms have pounded crops in the Midwest, leaving many farms underwater in Iowa and Illinois. Iowa officials said 36,000 people have been evacuated or forced from their homes in Iowa, and the state's losses may exceed the $2.1 billion suffered during the 1993 flood.
According to the National Weather Service, some areas of the Midwest may receive as much as 2 inches (5.1 centimeters) of rain in the next five days. Temperatures will average below normal in the next week, slowing the drying of saturated fields.
In March, the USDA reported that farmers intended to plant 86 million acres, down 8.1% from last year's record of 93.6 million. In its June monthly report released last week, the USDA left its outlook of planted area unchanged. The USDA will release a new report on crop acreage on June 30, which could show substantially reduced corn acreage.
Corn futures on the Chicago Board of Trade jumped more than 2% today, up 20% in just two weeks. July corn hit a new high of $7.6175 a bushel this morning before easing back slightly to $7.324 a bushel. Corn closed at $6.08 on June 3.
At the end of 2007, Newsom that corn prices would move to trade between $6.10 and $6.50 per bushel, most likely occurring in the last quarter of 2008. At the end of Q1, he that $6.10/$6.50 would be hit in the second quarter.
"I felt pretty good about those forecasts as the old crop market seemed to stall having posted a high of $6.27, and the new-crop December a high of $6.55 1/2," he told RI on Monday. "Then along came the flood and the December corn has rallied almost $2."
Newsom said the question now remains over how much crop damage the last $2 built into the price. In other words, how much has the supply driven, weather market rally contributed to the existing demand driven rally already in place in corn?
Ethanol consumed about 20% of last year's corn crop and is expected to gobble up more than 25% of the crop in 2008. U.S. ending stocks to usage ratio for the 2006/2007 crop year was pegged at 10.2%, the 4th lowest on record.
"It is possible that corn could extend this rally to $10, with an outside shot at the formerly ludicrous $15 to $16 area," he said. "The latter would occur if corn mirrors the supply drive spike rally in wheat that saw the Chicago contract rally 258%."
In a research note on Monday, Joe Victor and Rich Nelson of Allendale, Inc., a consulting services and futures brokerage company, said the firm remains bullish on corn futures due to Midwest flooding and declining crop conditions.
"Allendale will likely remain bullish into and through the June 30th planted acreage report and into the initial stages of 2008 pollination. Allendale remains guarded against declining feed use, export potential and ethanol production potential, all because of rising cash prices," the analysts noted.
Also on the CBOT Monday, July wheat fell 4 cents to close at $8.78 a bushel. July soybeans dropped 28 cents to $15.32 a bushel.
