Views on commodities and energy
How Much Corn Did U.S. Farmers Really Plant This Year?
Of the many years I have reported on Chicago Board of Trade corn prices, 2008 seems like a dream: when was the last time corn was front-page news in U.S. and foreign newspapers, Wall Street cable channels like CNBC, or at the Fed?
But we’re not dreaming. If oil is the fuel of the world economy, corn is the fuel of the food economy — the basic feed for meat animals, the basis of the starch and sweetener industries, a food and cooking oil. Add in the hundreds of industrial uses that start with corn, from ethanol to bioplastics to paints, adhesives and other products. Add in the rising middle classes of booming Asia who are demanding meatier diets — and U.S. corn for their herds.
So the historic highs in corn prices — unthinkably high prices, like $140 crude oil, before this year — are perhaps no surprise after all. Corn prices soared above $8 to all-time highs a week ago — more than double the 40-year average price range of $2-4 a bushel. The question is: how high can prices go?
Demand seems more of a domestic question mark than a foreign one. If the Democrats win in November, will they roll back the 2007 energy bill’s mandate for ethanol production to soar?
But more immediately, the market’s focus is on supply, not demand. The US corn crop — responsible for 50 percent of world exports — is now in its key month of growth, its key period for determining yields.
Corn users have plenty to be edgy about after the worst flooding in 15 years in the U.S. Midwest — the heart of corn production for not just the U.S. but the world. Estimates that as many as 5 million acres of U.S. corn and soybeans may have been lost or needed replanting sent both corn and soybean prices to records last month.
But last week, USDA calmed some fears when it forecast that farmers planted more corn than most analysts had expected. If the government is right, American farmers will harvest 78.9 million corn acres, the second highest since 1944, just behind last year. The unexpectedly high corn plantings reflected a 1.3 million acre increase from USDA’s March planting intentions report. What of the flooding losses? USDA said it calculated harvested acreage using 90.4 percent of planted acres versus the typical 92.4 percent to reflect the effects of the flooding.
There remains much skepticism in the trade about the numbers. USDA said it only had time to do a quick phone survey of some 1,200 Midwest farmers during June 23-25 — ahead of the June 30 acreage report — to a get a handle on farmers’ harvest intentions due to the flooding that occurred during the entire month of June.
But an Illinois-based data analysis firm, Lanworth, which uses satellite imagery to project corn and soybean acreage, was not surprised by the government’s latest projections. Lanworth studied satellite pictures from the area between the major rivers in Iowa, the state hardest hit by the floods, to assess how fast fields were drying out and when farmers started to replant, said Nick Kouchoukos, director of information services for Lanworth.
The company is currently estimating up to 2.7 million acres, corn and soybeans combined, were lost by flooding, versus the 3.0 million reflected in a USDA state reports compiled by its National Agricultural Statistics Service.
“We were and still are slightly more optimistic about the extent of the damage than NASS,” Kouchoukos said.
USDA plans a second survey of 9,000 farmers later this month to further fine-tune its acreage numbers, which will be first reflected in its Aug. 12 crop report.