Milling & Baking News - May 25, 2004 - 22

C O R N

W E T

M I L L I N G

Implications of early start for
2004 corn growing season
BY PETER A. MEYER
The spring in the Midwest was mild
early. For a week or two in early April,
it was warm and dry. It was a remarkably pleasant and unusual period. It
was so unusual that for a time both
the Cubs and the White Sox were
leading their divisions. A local paper
began to ruminate, perhaps tonguein-cheek, on the possibility of an "L"
series, where the local heroes from
the South (Sox) and the North (Cubs)
would clash for a long awaited Chi-

uclture WASDE report indicates a trend
yield adjusted for planting progress
of 145 bus per acre up from last year's
142.2. The planted acreage estimated in
May was 79 million acres, which was
the same acreage in the march planting
intentions report. Prior to the planting
report survey, at the U.S.D.A.'s Outlook
Conference, U.S.D.A. economists had
estimated corn plantings at 80.5 million
acres. Many ag economists are confident
that as the year progresses more acres
will have been planted in corn, perhaps

cago world series. New York, the Bay
area and even Missouri have indulged
in this baseball version of the double
dip but not Chicago.
The early spring manifested itself in
another way more critical to producers
and consumers of corn products than
the baseball standings. Although rain
in the eastern Corn Belt caused delays
in the last increments of acreage being
planted, the corn crop in the Midwest
was planted well ahead of normal. The
general consensus is that corn planting
in key Corn Belt states was completed
two weeks ahead of normal. This timing
has several benefits, including a longer
growing season, tasseling and germination will occur when the likelihood of
damaging heat is less and rainfall is generally better early in the growing season.
The proof of this hypothesis is that early
planted crops generally produce at or
above trend line yields.
The May U.S. Department of Agri-

reaching 81 million acres. If this were to
occur and yield remained the same, the
corn crop would grow from a projected
10.425 billion bus to 10.642 billion bus
- a record.
Since the majority of the corn was
planted, a significant amount of rain
has fallen. The crop has emerged and as
of today is a foot or more tall. The crop
condition report at mid-May had corn in
Illinois at 86% good to excellent, Iowa at
74% and Missouri at 77%. If these conditions were to prevail through harvest,
new storage bins would have to be built.
They will not, but the crop is off to a banner start.
The implications for corn wet millers are significant. The December 2004
corn futures contract had reached a
peak of $3.41½ per bu in early April.
In mid-May, it had fallen into the $2.85
per bu range. For a number of reasons
- the weaker U.S. dollar, the increased
consumption of corn for industrial

22 / Milling & Baking News, May 25, 2004

(particularly ethanol) use, the reduced
coarse grain and feed wheat stocks
worldwide after the drouth-ridden European 2003 summer, it is not likely that
corn will touch $2 or below unless there
is a dramatic and unexpected change in
one of those factors.
In addition to the above general factors, the impact of China's production
and consumption of corn and other
basic agricultural commodities will be
critical. The problems of some Chinese
soybean crushers caused soybean prices that had soared on the expectation
of Chinese demand in a tight U.S. oldcrop soybean market and in light of a
slightly disappointing South American
harvest, to plummet more than
$1 per bu in three days. Reduced
crushing margins, large stocks
of high-priced soybeans and
products - oil and meal - and
commitments to purchase highpriced beans both at sea and in
U.S. and South American terminals caused lenders to reassess
the ability of several Chinese
crushers to remain solvent. The
lenders then balked at advancing more money to them and the
crushers could not pay for their
cargoes. It remains to be seen
how these commitments will be
worked out. But the certainty
of Chinese offtake has been reduced.
All of these developments do
not ensure low corn prices in September when the crop is harvested. Nor has volatility been driven
from the market. Funds, which are
essentially large speculators, have
become increasingly important
factors in the market as the size of their
investments has grown. It is fair to say
their credo is not "buy and hold." But
is it also fair to say that a strong start to
the growing season for corn has abated
some of the fear that the U.S. industry
would be "priced out" of the corn market by dwindling supplies? On the other
hand, the Cubs, now beset with injuries
to two key pitchers and their home run
stalwart Sammy Sosa, may be out of the
running well before September. MBN

Peter A. Meyer is
president of PMI
Consultants, a
Chicago-based consultant to the food
and agribusiness
industry.
bakingbusiness.com / world-grain.com

http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - May 25, 2004

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