Two developments have the potential to depress grain prices.
One is the gigantic oil spill in the Gulf of Mexico. It had not stopped shipping as this column was written, but had the potential to disrupt it.
The other is the record speed of U.S. seeding this spring.
Seeding delays in the past two years raised worries about final yield. There were stories quoting formulas that said for every week’s delay, corn yields would fall by a certain percentage.
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But the crop was more resilient than expected and yields climbed to a record, jumping to 164.9 bushels per acre last year from 153.9 bu. in 2008 and 150.7 bu. in 2007.
This year, corn seeding is moving at a record pace with 68 percent in the ground, up from 32 percent last year.
With an early start, how high can yields climb?
Following the historical trend, yield this year would be 160.9 bu. but that seems low, given the good start and the yield potential of new varieties. Also, farmers applied less fertilizer last year because of the high cost but are believed to be using normal amounts this year.
There is lots of weather between now and harvest, but if yield at least matches last year, the U.S. will set a new record for corn production of more than 13 billion bu. and that could weigh on grain prices.
A more immediate threat to grain prices is the oil spill. It is already an environmental disaster and is devastating to the fishery in the region. The next question is how it will affect shipping.
The United States exports 60 to 65 percent of its corn, soybeans and wheat through Gulf ports.
If heavy crude oil fouls ship hulls, authorities will not want them entering the clean water of Gulf ports. Plans were underway to set up cleaning stations to spray off oil before ships move into the port shipping lanes.
The spill had not reached shipping lanes as of May3 but it was moving, pushed by strong wind from the south. Efforts to stop the oil flow were proving difficult and some reports said it might be weeks before it could be completely stopped.
If the oil spill restricts shipping, it will slow U.S. grain and oilseed exports, putting at least temporary downward pressure on prices.
