The Hindu Business Line : US corn may face setback; weather concerns remain

Crop economics
There are concerns that planting delays would reduce acreages and wet conditions would limit yield potential for the ensuing season.
If India has a bumper corn (maize) crop during the kharif 2008 harvest, an excellent export opportunity would be opened up.

G. Chandrashekhar

Washington DC, June 8

Wet weather conditions across the US corn belt (Midwest) continue to hamper farmers’ efforts to get the 2008-09 crop planted. Excessive rains in some regions have washed the planted seeds away and forced farmers to replant. There is a strong possibility of some of these acreages eventually going to soyabean.

According to a report issued last week by the US Department of Agriculture (USDA), 95 per cent of the corn crop had been planted four points behind last year and three points behind the 5-year average. Experts pointed out that while traders are normally comfortable assuming that the remaining 5 per cent of the crop would be planted, this year’s progress has raised concerns.

Weather conditions

Unless every intended acre is planted, the output may not reach the market needs and demand may have to be rationed, it is feared. Worse, time is running out to get the crop planted without yield loss.

No wonder, the US Agriculture Secretary recently expressed concern about the current weather conditions and the possible impact on production. “Prices should find solid support unless the weather pattern makes an abrupt change to more favourable conditions,” asserted an analyst.

However, such a change is not forecast.

This correspondent’s visit to Schilling Farms at Okawville (Illinois) on Thursday was revealing.

Talking to Rodney Schilling who cultivates corn, soyabean and wheat on a total of 1,300 acres, it was clear weather remains the top of growers’ concerns in the US Midwest.

Further concern

Corn planted in May had been washed away by rains and the soil is still wet. Rodney is waiting for the soil to dry so that he can replant. However, occasional showers and tornado alerts in the last 2-3 days are a matter of further concern. “If weather does not improve, I may switch to soyabean,” Rodney told Business Line.

He may well be reflecting the general mood of farmers in the area. But this season, it is not only the wet weather, but a big spurt in fertiliser prices that is putting crop economics out of gear.

Prices of fertilisers have more than doubled since last season, which is sure to push the cost of production up.

Rising prices of corn, soyabean and wheat on the futures exchanges are watched with anxiety and expectancy. Growers like Rodney, who sell to elevator companies, do not obtain prices that are recorded on exchanges like the Chicago Board of Trade.

Planting Delays

The cash prices are considerably lower than what futures prices might suggest. The divergence between cash and futures prices is of course a matter of investigation by the market regulator in the US.

Last week, the USDA issued its first crop rating for the 2008-09 season. It was later than usual obviously because of slow progress in planting. The rating was 63 per cent good-to-excellent, 15 points below last year.

But it met trade expectations considering the poor weather conditions thus far. Little wonder then that corn prices rallied to a new high. There are concerns that planting delays would reduce acreages and wet conditions would limit yield potential for the ensuing season.

The 2008-09 balance sheet is already too tight and has left no room to absorb production losses. This year is not off to a good start. So, expect corn prices to stay firm and possibly rally even further.

Softening prices

If India has a bumper corn (maize) crop during the kharif 2008 harvest, an excellent export opportunity would be opened up. Interestingly, if a part of corn acreage in the US were to move to soyabean — something that looks more likely — then the soya complex will risk a softening of prices.

Much of course depends on weather conditions over the next several weeks. August is particularly a treacherous month for crops.

It will be a weather-driven market until the crop size crystallises by September.

More Stories on : Foodgrains | Climate & Weather

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
NSEL signs MoU with Gujarat for agri-biz

Monsoon holds strong, west coast ‘low’ soon

Big catch

Luring all

Gold to test the resistance levels

Cotton: Bearish reversal

US corn may face setback; weather concerns remain

World Bank’s 10-point plan for the food crisis

NECC for fixing cap on maize, soya stocks

Is the Centre deliberately delaying paddy MSP hike decision?

Gold likely to make further gains; may rule firm