Macquarie underlined the relaxed attitude by US analysts to
US corn sowing delays by forecasting that plantings would exceed official
expectations despite the slow start – and cautioning of a "correction" in
Many commentators continued to downplay the yield implications
of the delayed US spring planting season, even after the US Department of Agriculture
overnight said that farmers had completed 19% of corn sowings as of Sunday,
thanks to cold and wet conditions.
That was below the 21% that investors expected, and the 28%
average by then.
At Citigroup, Sterling Smith said: "The cold and wet weather
will slow efforts over this next week, and the weather at the moment is far
from ideal, however it is still very early and this problem can go away quickly
Commerzbank said that "US farmers have shown time and time
again that they are capable of achieving very great progress with planting
within just a few days when weather conditions are more favourable.
"The fact that planting is currently lagging somewhat behind
the average should not be seen as undue cause for concern."
'Buying additional area'
Macquarie said that the drier conditions in the run-up to
spring would help farmers make a rapid catch-up on plantings.
"Generally dry conditions into this year's planting period mean
moisture levels are still relatively low, so the farmer should be able to get
onto the field relatively quickly after rains have passed through," the bank
Meanwhile the run-up in prices prompted by the sowings
delays, as investors inject risk premium, will only encourage farmers to plant
more of the grain, with area set to hit 93m acres, below last year's 95.4m
acres, but above the 91.7m acres the USDA forecast in an end-March report.
"This risk premium that has been built into the corn market
is also likely helping build on the bear case, as the higher price is surely
buying additional planting area," Macquarie analyst Chris Gadd said, quoting
analysis of historic USDA data.
Indeed, of the eight seasons since 2000 when the average April
corn price stood above that provided by crop insurance, in six "we saw an
increase in corn plantings" from the USDA's end-March estimate.
"When we combine this statistical analysis with the
anecdotal comments that we have heard from our US crop insurance business, we
are sure that we will see an increase in corn plantings come the final
estimates," Mr Gadd said.
Corn prices are poised for a "correction" as such factors
become apparent, and face a "sharp dip" later in the year, assuming "reasonable"
conditions for the summer pollination process.
"We think it is reasonable under this scenario to see new
crop Chicago corn futures at $4.00 a bushel," he said, forecasting a 13.92bn-bushel US harvest this year, only marginally below last year's record production.
The December contract was on Tuesday trading at $5.09 1/2 a
bushel, up 0.7% on the day.
Separately, University of Illinois agricultural economist
Darrel Good took a more pessimistic view of corn area prospects, saying that prices
were not high enough to encourage extra area.
"Without a more favourable corn price response, it would not
be surprising for acreage to fall short of intentions, particularly in northern
growing areas," he said, proving downbeat on sowings progress too.
"Prospects for a cool, rainy pattern over much of the
northern Plains and Corn Belt over the next 10 days do not favour rapid corn
However, he also downplayed the significance on yield of
delayed plantings, saying that in the 13 years since 1971 when corn was planted
late – defined as 20% or more seeded after May 20 – only in five did yields
turn out below trend.
"These results tend to support the notion that summer
weather, not timeliness of planting, is the major determinant of the US average
corn yield," Professor Good said.