New Delhi — The unusually slow pace of corn plantings because of inclement weather has raised concerns that overall acreage and crop yields in the United States would fall to an extent that will squeeze supplies from the world's biggest producer and put upward pressure on global prices.
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Market concerns have been visible in recent price movement on the Chicago Board of Trade where the most active corn futures traded 1.6% higher on Monday to reach an 11-month high of $3.94 a bushel. The contract has risen over 7% in the last one month.
"I've been working in agriculture since 1985 after growing up on a farm. I do not recall another year with challenges this great for corn," Arlan Suderman, Chief Commodities Economist at INTL FC Stone, said in a tweet.
ING Economics said in research note: "The large speculative short position in both corn and soybeans, and delayed planting does leave the market vulnerable to a short covering rally."
Until recently, the market was confident that the US farmers are well-equipped with labor and tools to complete planting even in a smaller planting window.
But market sources are now of the opinion that the window might be too short to reverse the damage.
An estimated 49% of the intended domestic corn acreage had been planted for the 2019-20 crop year through Sunday, the US Department of Agriculture said on Monday.
Planting progress rose 19% week on week, but was still significantly behind both the year-ago pace of 78% and the five-year average of 80%, according to the USDA.
At this pace, plantings for the period has been the lowest on record.
Floods in the Midwestern part of the US in March were soon followed by heavy rains and snowfall, adding water to already saturated fields, and pushing corn planting beyond the middle of April.
Market participants believe that unfavorable weather conditions are likely to continue, resulting in record reduction in corn acreage in the US. Weather conditions have not only made it difficult to replant corn, but have also prompted farmers to switch to soybeans.
Wet weather in the US resumed on Friday after a gap of 2-3 days and are expected to continue across the western Midwest and the plains through this week, according to a Colorado-based space technology firm, Maxar.
Persistent showers and storms will stall corn and soybean plantings in the western corn belt and will likely lead to flooding in some areas, Maxar said.
"Below normal temperatures will continue across the northern Plains over the next 10-15 days, which will inhibit planting and germination of crops due to low soil temperatures," it added.
Farmers had a 2-3 days window where they could have taken advantage of the dry weather and plant corn but there is a risk of poor yields due to the forecast of rains this week, said Christopher Hyde, senior meteorologist with Maxar.
As weather troubles continue, markets sources have lowered their estimates for acreage under corn to well below USDA's forecast of 92.8 million acres. Maxar expects corn acreage in the US to be at around 83 million acres.
Maxar has also cut its forecast for US corn production in 2019-20 to 371.2 million mt, from their previous forecast of 374.4 million mt, and their yield forecast to 175.9 bushels per acre, from 176.2 bushel per acre earlier.
Suderman said: "We must now acknowledge the risk of a record large reduction in acreage planted this year due to the inability to plant."
According to USDA's crop progress report, in the major producing regions of Iowa, Illinois, Indiana, and Dakotas, the planted area remains significantly lower than the five-year average.
Farmers in the US who purchase Common Crop Insurance are eligible for prevented planting payment. Under the scheme, once the final planting date for a crop arrives, farmers have the option to either take a prevented planting payment by leaving fields fallow, or can plant the intended crop, or any other crop.
In many cases, taking the prevented planting payments will have higher expected returns for US corn farmers than planting corn or soybeans, according to an analysis by University of Illinois and Ohio State University.
Suderman said that even though it was too soon to put a number on the likely fall in acreage, around 4 million acres of area under corn could fall under prevent plant. The figure could go even higher.
"This doesn't even account for the millions of acres previously planted that have poor emergence that would normally be replanted, but farmers will likely not have the opportunity to do so", Suderman added.
Replanting of corn is unlikely to happen in most areas as it would be too late to replant after May 31, Hyde said.
-- Shikha Singh, Shikha.firstname.lastname@example.org
-- Edited by Sambit Mohanty, email@example.com