CME: Farmers Struggle as Hot Weather Continues

by 5m Editor
20 July 2011, at 7:42am

US - With crop conditions deteriorating and more cattle coming to market early, Steve Meyer and Len Steiner report on the struggling corn situation where in some places, pastures are burning.

The latest USDA report reflected the impact of extremely hot temperatures on grain crops and pasture conditions.

For the week ending 17 July, USDA reported that 66 per cent of the corn crop was in good/excellent (G/E) condition, compared to 69 per cent the week before and 72 per cent a year ago.

According to wire reports, trade was generally looking for a one to two point decline in the G/E corn rating and overnight corn traded 10 cents higher.

The poor and very poor corn rating also rose two points to 11 per cent this week as the situation in a number of states is quickly deteriorating.

The corn crop in Texas, a state hit by the worst drought conditions in 100 years, appears to be in a dismal state. Texas reported that 1,95 million acres were planted in corn this past spring.

The latest crop condition report noted that 35 per cent of the Texas corn crop was in very poor condition and another 30 per cent was rated in poor condition.

This is by far the worst performing Texas crop in the 26 years that the crop condition reports have been issued.

Normally this is one of the first states to start harvesting and supplementing corn supplies ahead of the harvest in the Corn Belt.

With this year’s tight corn stocks and expected poor harvests across the South, it appears we will be scraping the bottom of the bushel until the large states come into play.

The situation in a number of other large Midwest states also appears to be quickly deteriorating. The G/E rating declined six points in Indiana and Illinois while Kansas G/E rating was down a whopping nine points compared to the previous week.

One item that grain analysts point to is the relationship of the crop development phase and temperatures. The corn crop is currently in the reproductive phase (silking) and high temperatures, especially overnight, are shown to have a significant impact on final yields.

For the latest reported week, 35 per cent of the corn crop was in the silking phase, compared to 62 per cent a year ago and 47 per cent five year average.

Silking in Illinois jumped to 62 per cent and it was at 31 per cent in Indiana and 32 per cent in Iowa.

Agronomists point out that high nighttime temperatures are negative for corn since they tend to increase respiration rates and lower dry matter accumulation. The sugars created during photosynthesis go towards keeping the plant alive rather than growing. The results are poor corn yields at harvest.

Hot temperatures are taking their toll on pastures as well. The latest report noted that 32 per cent of US pastures were in poor/very poor condition, three points higher than the week before and significantly worse than a year ago when just 11 per cent of pastures were rated in poor/very poor condition.

Pastures in the Southern Plains are burning.

The poor/very poor rating for Texas now stands at 94 per cent, and it was 78 per cent for Oklahoma and 90 per cent for New Mexico.

Lack of pastures has been pushing more cattle onto feedlots recently and we expect the latest data to show a significant jump in the number of light and very light calves placed on feed.

This will tend to accelerate livestock growth and has the potential for creating significant gaps in marketings early next year.

With corn prices hovering at seven dollars a bushel, such light placements are expensive and far from the optimal feeding regimen for feedlot cattle.

The result could be lighter and lower graded cattle coming to market in late fall and winter.

The deteriorating pasture conditions also could skew the normal seasonality in the US fall cow run. With more cows coming to market today, cow meat supplies and grinding materials may not be as readily available in October and November.