Monday, April 7, 2014

US corn harvest may prove bigger than sowings data suggest


The switch away from corn by US farmers may end up proving less momentous than it first appears.

Sure, it looks like corn has fallen well out of favour, with US growers expected to cut sowings of the grain by 3.9%, or 3.67m acres, to a four-year low of 91.7m acres.

But the impact on corn production may not be as large as the planting data imply, even before getting to the important issue of summer weather risks.

What history says

There are two reasons not to expect such a sharp drop in corn production.

The first is that, for corn, history suggests that today's planting figure may well be an underestimate � March planting reports have a habit of being too downbeat on corn's appeal.

OK, that was not true a year ago, when the March estimate of 97.3m acres turned out to be 1.9m acres too big. But 2013 witnessed unusually difficult spring sowing conditions, thanks to persistent rains.

For 2012, the March sowings forecast was 1.3m acres too low. In fact, in seven out of the past 10 years, the final sowings figure has beaten the March estimate.

Where acres are being lost

The second dynamic to factor in is where corn area is being lost. The farmers turning away from corn this time are, to a great extent, in area less-suited to the grain.

Certainly, plantings are being cut in many higher-yielding areas too, notably in the productive state of Nebraska.

But the south eastern states and, especially, Texas, where growers are switching large areas to cotton, have a more patchy long-term record of beating the average yield.

And the biggest loss of corn acres is in the northern Plains, where growers have consistently fallen short of their peers elsewhere on corn yields, especially in North Dakota, which alone is losing 900,000 acres of corn sowings this year.

By contrast, plantings are being gained in Iowa, where corn crops have yielded more than the average even in 2013, when handicapped by worse weather than other parts of the Corn Belt.

Soybean switch

Of course, the opposite effect may be seen in soybeans, for which March sowings data have a habit of overestimating final plantings, and which North Dakota farmers are scrambling too in their switch from corn.

The state, which is best known as a wheat producer, has a history of producing well-below-average yields of soybeans, as well as corn.

Indeed, it is testimony to the standing at which wheat has fallen in growers' affections that farmers on land best suited to the grain opt for row crops instead, even with the likelihood of well-below-par yields.

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