May 31 (Bloomberg) -- Corn farmers from Iowa to North Dakota who delayed planting because of unusually heavy rain may stick with plans to sow crops well beyond the date for optimum yields, rather than switch to soybeans or leave fields fallow.
“I’m going to try to plant corn until June 10 before deciding to switch to soybeans or file an insurance claim,” said Mark Imoehl, 46, who farms 1,800 acres of corn and 1,100 acres of soybeans in Castalia, Iowa. “The 50 percent of the corn that is planted has good yield potential, and I just need some dry weather to get the rest planted.”
Corn futures are up 10 percent in the past two weeks as planting delays fueled concern that output would fall short of the record crop forecast by the U.S. Department of Agriculture. While 86 percent of the land was sown as of May 26, that’s behind the pace in 2012, when 99 percent was completed, USDA data show. The U.S. is the world’s largest grower and exporter.
Midwest rainfall was three times normal in April and May, including 17.67 inches since March 1 in Iowa, the top U.S. corn grower, that was the wettest on records going back to 1873, according Harry Hillaker, the state climatologist. That left 13.6 million acres unplanted, including 6.4 million in Iowa, Minnesota, North Dakota and Wisconsin, USDA data show. Because yields are highest when corn is sown by mid-May, planting may be as much as 4 million acres less than the USDA’s forecast, according to Roy Huckabay at the Linn Group in Chicago.
Starting tomorrow, most farmers with government-subsidized crop insurance can file claims that pay 60 percent of coverage for land that was unplanted because of rain. Alternatively, growers can plant and then file to get 60 percent to 85 percent of coverage for losses at harvest, though the payout is reduced the later the claim is filed. The last option is to switch to soybeans, which can be planted later in the year and have a June 10 to June 20 start for insurance claims.
While planting corn in June can reduce yields by 20 percent, the increased soil moisture offers optimism for a big crop and rebuilding U.S. inventories that are headed for a 17-year low, Citigroup Inc. said in a May 29 report.
Last year’s drought, the worst in the U.S. since the 1930s, cut corn production by 13 percent and helped send payouts on crop-insurance claims surging 59 percent to a record $17.27 billion, the USDA reported on May 28.
This year, the government forecast a 31 percent rebound in production to a record 14.14 billion bushels as farmers said they intended to sow 97.28 million acres, the most since 1936. As of May 26, 86 percent was planted, compared with a five-year average of 90 percent. Areas still unsown included 2.1 million acres in Iowa, 1.6 million each in Minnesota and Wisconsin, and 1.1 million in North Dakota.
Based on the past six years of crop-insurance claims, farmers idled on average 1.43 million corn acres when wet weather prevented planting, with a peak in 2011 at 3 million, data from the USDA’s Risk Management Agency show.
Corn futures for delivery in December, after the U.S. harvest, rose 1.6 percent to $5.715 a bushel at 12:32 p.m. on the Chicago Board of Trade. Prices reached an 11-month contract low of $5.12 on May 21. The crop-insurance base price, used as a benchmark for claims, is $5.65, established by the average futures close in February.
Farmers in Illinois will plant past the insurance deadline because of the potential for high returns with improved soil moisture, said Scott Docherty, the general manager for Top Flight Cooperative in Monticello, Illinois, which buys more than 34 million bushels of corn and soybeans annually in five counties from Decatur to Champaign.
Yields may average 165 bushels an acre, up from 117 bushels last year and near the 10-year average, and may reach 185 bushels with normal weather over the next three months, Docherty said.
“Market concerns about the much delayed start to the U.S. corn planting cycle seem to be dissipating,” Aakash Doshi, a Citigroup analyst, said in a May 29 report. “Price risks should be to the downside” as December futures fall to $5, Doshi said.
Farmers probably will sow 96.5 million acres and boost output to a record 13.98 million bushels on yields of 158.5 bushels an acre, Doshi said. Inventories at the end of August 2014 will double from a year earlier to more than 1.9 billion bushels, the analyst said.
Some farmers that paid higher premiums on policies that provide 85 percent coverage and have lower costs for fertilizer and rents are already making the decision to file claims tomorrow.
Greg Studeman, 51, who farms 1,200 acres with his brother near Plato, Minnesota, says he can net about $200 an acre from crop insurance, compared with the expected loss of $90 an acre if he plants after tomorrow, because of lower yields. In 2011, when he planted after June 1, yields were 125-140 bushels, down from an average of more than 180. After planting 830 acres this year, he expects to idle the remaining muddy fields because the farm got as much as 7 inches of rain this week.
Acreage abandoned because of rain in northern areas may be offset by the yield gains for crops already in the ground, according to Huckabay, an executive vice president at Linn Group. Prices also are under pressure from record harvests in Brazil and Argentina and improving prospects for crops in Russia, Ukraine and Europe, he said. U.S. export sales in the marketing year that ends Aug. 31 are forecast to fall to the lowest since 1972, the USDA said May 10.
“It’s unlikely corn can build a lasting rally with record supplies coming out of South America,” Huckabay said. “Farmers should be more aggressive selling this planting rally with the overall improvement in soil-moisture reserves. It would take a drastic shift to hot, dry conditions in July and August to damage yield potential.”
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