Farmers planting corn at pace amid threatening weather

Farmers have been planting corn at the fastest pace ever in the US Midwestern grain belt this spring, raising the danger that some of the crop could be damaged if forecasts for cold weather in parts of the region this week come to pass. Also in play will be the US Department's April supply-demand report that will estimate corn and soyabean production in drought-ravaged agricultural giants Brazil and Argentina, and forecast grains ending stocks in the United States.
The weather - with temperatures forecast between 28 degrees and 32 degrees Fahrenheit in northern Illinois, Michigan, North Dakota and Minnesota - could, however, spring less of a surprise than the USDA report on Tuesday. Meteorologists said the blast of cold weather was expected to largely sweep through areas where hardly any corn had been planted or where the crop has not developed enough to be hurt.
The USDA report will be closely watched for the department's estimate of US corn ending stocks this summer. "It will be interesting to see the changes to the corn balance sheet. They came in below expectations (in the quarterly stocks report) and people have been skeptical about their stocks numbers in the past," said grains analyst Shawn McCambridge of Jefferies Bache.
In its quarterly stocks report on March 30, the USDA's estimate of US corn stocks as of March 1 was about 150 million bushels below trade expectations at 6.009 billion, implying stronger-than-expected usage of the grain. In its monthly March supply-demand report, the USDA pegged US corn ending stocks in the 2011/12 season (September-August) at 801 million bushels, down from 1.1 billion in the preceding year.
Analysts polled by Reuters were, on average, expecting corn ending stocks at 721 million bushels in Tuesday's report. The USDA's quarterly corn stocks estimates have sometimes been as much as 300 million bushels bigger or smaller than trade estimates, making for volatile markets and sharp criticism of the data.
Some critics have argued that the USDA's corn stocks estimates differ sharply from trade estimates due to the department using a lower conversion rate for turning corn into ethanol than what might be the industry standard. Analysts said a slightly higher "grind rate' of 2.8 gallons of ethanol from 1 bushel of corn versus the USDA's 2.7 gallons could mean that the industry's corn use would drop by 150 million bushels of corn a year.
Scott Irwin, professor of agricultural economics at the University of Illinois, said the "grind rate" being the reason for the variations in corn stocks might not be valid because the disparity began showing up less than two years ago. "We've had decades of fairly steady numbers," he said.
Irwin said he was expecting the USDA to reduce its 2011/12 corn ending stocks estimate by 100 million bushels to 701 million. "Although one can make a reasonable case for even lower stock levels based on implied feed use and residual." The USDA's quarterly grain stocks reports have caused Chicago Board of Trade corn futures to either fall or rise by the daily trading limit the last five times.
The supply-demand report on Tuesday could be much less volatile, but could provide some price direction for soyabeans. As the soyabean crops in Brazil and Argentina continue to shrink from the impacts of a drought, traders will be closely watching the USDA data for its latest revisions to production.
Traders polled by Reuters were expecting the USDA to peg Brazil's soyabean production at 67.114 million tonnes, down from 68.5 million in March. Argentine production was seen dropping to 45.193 million from 46.5 million. CBOT soyabean futures hit a seven month high last week as the smaller crops in South America shifted some of the export demand to the United States, the world's top grower of the oilseed ahead of Brail and Argentina.
"Part of the rally is due to the mindset that old-crop beans need to be rationed due to South America," said Mike Zuzolo of Global Commodity Analytics in Lafayette, Indiana. He also said there was also some concern over the weather in the US Midwest turning cold this week. Grains analyst Bill Nelson of Doane Agricultural Services in St Louis, Missouri, said he was expecting the USDA to raise its estimate of the soyabean crush in the report this week, adding that demand for soyameal has been strong due to smaller soya crops in Brazil and Argentina.