Corn planting progress is at a record slow pace, and while we are not yet concerned, we think it’s worth highlighting for investors at this point. As of Sunday, 28% of the U.S. corn crop was in the ground, well below last year (85%) and the five-year average (65%).
Corn emergence is also developing as a bit of an issue as well – only 5% of the crop has emerged compared to 52% last year. Obviously, what hasn’t been planted can’t come out of the ground, but cool temperatures have certainly kept what has been planted in the ground.
We think the weather this week has likely been constructive and should encourage an increased planting pace and make no mistake, the crop can get into the ground very quickly. We wouldn’t be surprised to see an update indicating 40%+ of the crop in the ground, so we will be close to half the crop in the ground by the middle of May. For some perspective, the corn crop usually reaches 50% planted during the first 7-10 days of May, so it looks like we are running about 2 weeks behind the average.
We are less concerned about planting then we are about emergence – the longer the crop takes to emerge, the greater the risk of lower yields. However, the weather appears to be conducive to emergence and soil conditions have improved (warmed), so the pace of emergence should pick up over the next couple of weeks as well.
So, there are a few risks “emerging” here – the longer it takes the crop to get into the ground, the greater the chance that some farmers make the late May decision to switch acreage to soybeans. The acreage risk switch isn’t that significant (maybe 1-3 million acres). Before switching to soy, farmers can elect to switch to earlier maturing (but lower yielding) hybrids. We should also point out that in years with planting delayed in as meaningful a fashion as it has been this year, trend line yields have suffered (see below).
Bottom line, the USDA WASDE estimate for new crop corn yield of 158 bushel per acre may be somewhat aggressive given the current conditions, but by and large we are not that concerned with yields at this point, so we are sticking with our bearish bias on corn.
HEDGEYE RISK MANAGEMENT, LLC