Planting has been severely delayed this year due to the cold wet weather that has persisted throughout much of the central and eastern U.S. The delay has caused grain prices to rise with many fearing a similar disaster of planting in 2013.
Harsh winter temperatures and the booming oil industry in the western Dakotas has led to a logistical nightmare on the railways. Ethanol plants, mainly located in the Midwest have not been able to ship their product to refineries on the east coast for blending. This back up has caused ethanol prices to skyrocket reaching an eight year high in mid-April, which has led to higher prices at the pump.
Corn planting across the US has lagged considerably behind the national average. As of April 27th, 19% of the corn acres were reported planted by the USDA, below the five-year average of 28%. Planted acres are well above reported numbers seen this time last year when only 5% of corn had been planted.
The weather outlook for the next few weeks is not encouraging. USDA meteorologist Brad Ripley commented, "Unfortunately, looking ahead to next week, it will stay cool in the wake this week's storm, and just when things might be looking up, another storm develops across the Plains states around May 7th or 8th." The window on corn planting is closing and if the bad weather continues farmers will reach a critical point when delays will result in crop shortfalls in 2014.
Havoc on the Railways
Bob Dinneen, the president of the Renewable Fuels Association, described the state of the railroad system as "sheer chaos" in a letter to the Association of American Railroads. He also argued that the high price of ethanol caused by the railway backup has tarnished the image of ethanol in the U.S.
In response Edward Hamberger, chief executive of the railroad association, said, "There have been recent rail-service challenges in certain parts of the country, and railroads are working around the clock to mitigate them. Those challenges result from a confluence of events that were concentrated in particular regions," and include a winter that "was far worse than usual and forced railroads to dramatically shorten train lengths."
As the weather has warmed slightly, pressure on the rail system has been relieved allowing more ethanol shipments to reach their destination.
Corn prices were strong in the month of April gaining almost 3.5%, prices closed at $5.19 per bushel on the front month contract. Poor weather conditions, strong export numbers, and concerns over tensions in Eastern Europe were the main contributing factors to the rise. U.S. corn ending stocks for the 2013/14 marketing year were projected 125 million bushels lower to 1.331 billion bushels, due primarily to increased export demand. Exports for U.S. corn in the 2013/14 marketing year were increased by 125 million bushels to 1.750 billion bushels.
Soybean prices increased 3.35% this month to close at $15.11 per bushel. Heavy soybean exports through the 2013/14 marketing year has been the driving factor behind the increase in soybean prices. The WASDE report projected ending stocks of 135 million bushels down 10 million bushels from March and a stocks-to-use ration of 4.0% compared to 4.5% last month. Export estimates are 1.580 billion bushels reflecting the record pace of shipments and sales since the beginning of the year.
Wheat prices increased 3.5% this month to close at $7.21 per bushel. The harsh winter caused significant damage to the winter crop. The USDA wheat tour began at the end of April, reports are consistent with concerns that the Hard Red Winter wheat is behind average expectations due to the late thaw and harsh winter.
The University of Creighton farmland price index increased in April for the first time since November 2013. Economist Ernie Goss said, "Recent boosts to agriculture commodity prices should boost the economy in the months ahead."
Bankers were asked this month what the expected breakeven price for farmers planting corn this year. The average break-even price given by rural bank CEO's was $4.30 down $0.54 from the 2013 estimate. Over 65% of bankers are confident the break-even price will be below $4.50.
Despite the late start to planting, many farmers are still confident that there is enough time to complete corn planting, barring continued wet and cold weather into mid-May. We estimate farmers have three weeks to plant corn, before considering the switch to soybeans.
Forecasted warmer temperatures, wind, and sunshine will dry fields out quickly allowing farmers to get their crop in the ground. We will be closely monitoring planting progress in May, along with any and all implications derived from river closings due to flood conditions in the Corn Belt.
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