Very accommodating weather through most of last week allowed for a record corn planting pace, with a full 43% of the U.S. corn crop getting into the ground over the seven day period from Sunday to Sunday. As of a week ago Sunday, only 28% of the crop was in the ground and that number has moved to 71% as of this Sunday (5/19). This compares favorably with the multi-year average of 79%.
Farmers are expected to plant 97.3 million acres of corn this year, so 43% of that is approximately 41.8 million acres or 16.9 million hectares or 169,000 square kilometers or an area the size of the state of Wisconsin (169,639 square kilometers). Hedge fund buyers of corn underestimate the power of modern farming techniques at their own peril.
Further, this past weekend saw heavy rainfall over most of the Western Corn Belt (moving east, slowly) so most of the corn states look to be getting a good soaking. When we marry the moisture with improving soil temperatures, we see that corn emergence has improved as well with the crop now 19% emerged (versus multi-year average of mid-40%).
We are sticking with our bearish bias on corn and continue to see the corn crop development as constructive for the protein companies and agricultural processors. The chicken producers (SAFM and TSN) look a little frothy to us in terms of valuation and expectations, so we prefer SFD at this point. ADM continues to make sense to us.
HEDGEYE RISK MANAGEMENT, LLC