Corn analysts say the U.S. Department of Agriculture didn’t reduce American corn supply enough in its latest supply and demand estimates.
The USDA’s May 11 World Agricultural Supply and Demand Estimates report shaved average yields by three bushels an acre from the long-term trend to reflect slow planting progress through early May.
Excessively wet weather is keeping farmers off their fields with growers in Illinois and Indiana seeing the rainiest April since 1895.
The three bu. yield reduction chops 255 million bu. off total supply.
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Corn analysts think the cut should be deeper, which would further tighten 2011-12 ending stocks and strengthen corn and other grain and oilseed prices.
WeatherBill, the pioneers in weather insurance, believes the USDA is way off the mark.
It is forecasting a 834 million to 1.6 billion bu. loss because of delayed seeding.
WeatherBill based its estimates on studies conducted by universities in the corn belt documenting the relationship between late plantings and lower yields.
The data was used in conjunction with the USDA’s May 9 crop progress report that showed 40 percent of the corn crop had been planted compared to the five-year average of 59 percent.
Planting is particularly slow in the eastern corn belt where some states had seeded less than 10 percent of the crop.
WeatherBill’s best case scenario uses the premise that corn planting will progress from May 9 at the fastest rate achieved in the last 30 years. The worst case scenario uses the slowest planting rate in the same period.
Corn prices would need to increase significantly if the WeatherBill fore-c ast proves accurate to ration demand and keep ending stocks from falling lower than the USDA’s forecast of 900 million bu.
However, Rich Nelson, director of research for Allendale Inc., rejected WeatherBill’s forecast calling for a reduction of up to 1.6 billion bu.
“That’s just preposterous,” he said. “No one believes it.”
However, he does agree that the USDA underestimated yield reduction as it did in 2008 and 2009, the last two years of late planting in the corn belt.
In both years, the USDA had to adjust its production estimate down again in its June report. In one of those years there was a further reduction in July.
Allendale estimates 1.1 million acres of corn won’t be seeded, which shaves 168 million bu. off the production number. That doesn’t include yield reductions for the portion of the crop that was seeded late.
Nelson expects the USDA will drop average yields by another bushel per acre in the June report and then reduce it further in July.
He expects carryout stocks to fall to a 19 day supply, down from 25 days forecast in the May report.
“You’re getting (into) near record territory,” he said.
The record was 18.2 days of carryout supply in 1995-96.
Nelson predicts nearby corn prices on old crop to rise to $7.75 per bu. by the end of the crop year from $7.04 earlier this week and new crop to hit $7.50 in the fall from $6.40 earlier this week.
Rising corn prices would elevate the entire grain and oilseed complex, boosting prices for crops more commonly grown in Western Canada.
