US Replants Near Historic Levels, But the Market Doesn’t Believe

It has been a difficult spring for planting here in southwestern Ontario.  I heard a statistic the other day that it is been one of the wettest Mays in many years, which obviously makes it difficult for planting.  I started planting corn on April 26th.  That was immediately followed by heavy rain and cold temperatures.  Needless to say, it took almost a month for that crop to emerge from the ground.  Meanwhile, the corn that I planted on May 16th has already emerged.  Some years are like that.  It just seems in 2017 getting this crop off to a good start has been difficult.

Spring can be like that.  I only have to go back to June 2011 when I actually planted corn in June.  In a spring of frequent rains and tough soil conditions, my memory harkens back to that year often.  We are not there yet, but clearly in Ontario the crop mix is changing.  It will be increasingly difficult to get all of the corn planted, which Statistics Canada had predicted (2.2 million acres) earlier this year.

I started planting soybeans on May 24th, but that was stopped by rain before noon that day.  It was followed by another inch of rain today.  So with June 1st staring me in the face, that’s when the majority of my soybeans will be going in.  It surely will be true for much of Ontario.  Hopefully, the yield gods will be kind.

There are similar difficulties with planting in the American corn belt.  I made mention of them last week.  In the Eastern corn belt close to southern Ontario there is obviously the same type of weather.  Simply put, wet weather has impacted much of Midwest.  Interestingly enough, corn replant is near historic levels, which was the title of the article from DTN’s own Emily Unglesbee this past Thursday.  In the article, Emily quotes several seed companies talking about the demand for replant seed is reaching historic levels.  It all goes to show that this 2017 crop is getting off to a tough start especially in some important growing areas in the American Midwest.

So is it a concern? Well, simply put, sure it is for people like me who have to get a crop in and for many others in the United States.  However, it is always a bit of a puzzle when this happens to you because the market doesn’t care.  Grain prices have actually retreated over the last couple of weeks with July corn finishing at $3.69 and July soybeans finishing at $9.39 today.  In other words, if the market is always right, it’s telling me there are really no concerns in the American fields.  The corn supply will not be impacted and it’s pretty clear the soybean supply will only grow bigger. With it raining outside and all the social media reports of wet weather, it makes you wonder is it all adding up the way it should be.

At first glance I think not.  How could the American crop not be impacted severely from such tough planting conditions?  However, I do have a nagging recurring thought that the market is right.  It must be with corn ending stocks over 2 billion bushels, the computer algorithms have been programmed to trade off the USDA numbers that say everything is fine.  I’ll leave that with you.  The complete story has probably not been written yet.

It’s in that context that I thought maybe we should review just where we are.  Remember, the USDA has said that American farmers will plant 90 million acres of corn this year, down 4 million acres from last year.  They also said that soybean acreage would be up 7% from a year ago coming in at 89.5 million acres.  The USDA has projected the corn yield to come in at 170.7 bushels per acre.  This was the theory back on March 31st. With all the wet weather we’ve had and the planting and replant problems, how does this change expectations?  Further to that, why is the market ignoring it now?

Part of the answer will come June 30th when the USDA actually gives us the actual plant corn acreage number.   It would seem obvious to me that it would be less than 90 million acres, and less yield too.  That should translate into ending stocks less than 2 billion bushels.  At the same time you would think that the soybean acreage would be higher even eclipsing the core number, which is very rare in American agriculture.  Of course, the corn price would be expected to go up.

That last part isn’t happening at least in front of the US Memorial Day weekend.  My experience tells me that the market knows more than me and the conditions might not be as bad as advertised across US corn.  I even think back to all those analysts who were predicting $4.25 Dec corn last winter and early spring.  The market seems to be laughing at them.

There are implications for Ontario and Quebec as well.  It would seem at this point were going to be short corn acres.  However, if the wind starts to blow and the sun shines and the heat beats down maybe it all comes together.  Maybe it all comes together in the US Midwest too.  It’s hard to believe now.  Market action post Memorial Day should give us some further clues.

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