Chicago Board of Trade Market News
Outlook: Planting progress for U.S. corn was 55 percent complete by May 3 and surpassed the five-year average rate of 38 percent complete. The tremendous efficiency of U.S. farmers is reflected in the fact that total corn planting could progress by more than 35 percent in one week’s time, from 19 percent the prior week to 55 percent complete. Such progress increases the prospects of the average U.S. yield meeting or exceeding trend-line yields. Of course, planting progress is not the only, or even the dominant, factor in determining the success of final production.
Current soil moisture levels are favorable across the U.S. Corn Belt and that also increases probabilities for a successful crop, assuming favorable moisture levels remain throughout the growing season. Last year the planting pace of U.S. corn was only 28 percent complete by May 3 due to heavy rains, which acts as a constraint on this season’s five-year average planting rate. Similarly, a window of time also opened last year and the five-year average was surpassed before the planting season was complete. Then, the soil moisture levels and temperatures continued to remain favorable through the entire growing season to produce an average yield well above trend. Present conditions increase the probabilities that such a scenario could happen again, but there is a vulnerability in treating increased probabilities as certainties.
Throughout history the probability of having corn yields significantly above trend has been less than 20 percent. This season’s planting progress, present weather and seed varieties presumably increase that prospect. But even if that probability is doubled or tripled, it still seems unwise to sell at present price levels and then say, “prove me wrong.” Multiple end-users of corn are aware of the opportunity that is being offered with the average corn price below $4.00 per bushel out through December of 2016.