Author: Michael Ferrari, PhD
VP, Applied Technology & Research
Corn futures are trading at a 2 year high with analysts becoming more concerned about tight carryover stocks into 2011. While harvest progress this season has been favorable, mid crop weather conditions limited crop development, which was underscored by USDA’s significant revision (4% downward) on the crop size in mid October. In addition to low stocks, demand both domestically and overseas is still anticipated to remain strong, so most indicators are looking at tight stocks for the start of the year. While this year’s US corn crop will still be healthy, weather did limit development during July and August. The first two maps below show the July and August year-over-year maximum temperatures, with the primary corn and soybean growing counties highlighted. Max temperatures for much of this crucial period were higher than last year, and in some cases, significantly higher. This served to limit yield potential, particularly during periods when evening temperatures stayed high, not giving plants enough time to rest as part of a healthy diurnal cycle.
In addition, acute weather events such as the flooding in key counties in Iowa resulted in lost acreage for some growers. The bar graph below shows how the Weather Trends long range forecast for the y/y pattern was presented to clients before planting. It shows that our seasonal outlook called for warmer y/y temps for most of the Jul/Aug period (noted by the bars), and the dashed line (observations) shows that this forecast verified.
As we approach the end of the calendar year, tightness in the market is expected to remain, and any short term weather shock is therefore likely to cause spikes in futures. While corn carry over is the issue discussed here, problems with the short US cotton crop and global concerns around wheat stocks will make planting conditions in 2011 a very important milestone for 2011 prices. Acreage will likely shift, and conditions during the planting window will set the stage for 2011/12 price levels.
Feel free to contact Weather Trends to discuss our long range outlooks, and how they figure into global crop potential for 2011.