Corn futures slumped after the U.S. Department of Agriculture delivered a production forecast that was bigger than analysts expected as plants have been able to do relatively well despite a delayed growing season.Which makes this front-page story in Wednesday’s Capital Times all the more intriguing, and concerning. That article showed how increased rains and low prices in South Central Wisconsin in 2019 have cut the acreage of crops planted.
Record spring flooding led to a historically delayed planting season in the Midwest. The late start meant many analysts and traders have been expecting a negative impact for yields. But crops have proved to be resilient, partly thanks to better weather as the growing season progressed. The USDA has consistently delivered a rosier outlook for supplies than the market predicted, sparking a slump for prices.
Still, harvesting is behind normal stages for many farmers. That means crops are vulnerable to bouts of cold, especially with snow forecast for swaths of the U.S. Plains and Midwest this week that could end up stifling yields….
Corn production will total 13.779 billion bushels, the agency said Thursday in its monthly World Agricultural Supply and Demand Estimates report. Analysts surveyed by Bloomberg had forecast 13.588 billion on average. Futures extended declines after the report’s release.
Fourth-generation farmer Ryan Ripp said his family finished planting corn in the “nick of time” at the end of May. He said the wet conditions and cooler temperatures have delayed corn silage harvesting on the family farm in Lodi.
“We’ve seen flooding in fields, erosion in some cases, more wet rain. It’s been basically too much rain,” Ripp said.
Ripp, who consults forecasts on three weather apps, said he is figuring out how to work around consistent rain and determine some kind of trend to inform his work in future years…
This year, 9% of crop acres — 31,948 out of 347,544 — in Dane County went unplanted, according to the FSA. These acres were meant for crops like barley, corn, soybeans, oats and wheat. In 2018, 3% of crop acres — 10,517 out of 373,034 — went unplanted, up from 2% in 2017 and 1% in 2015 and 2016.
Matt Diebel, Dane County’s watershed management coordinator, pointed out that the number of total crop acres has declined, from 378,926 total acres in 2015.
Seen too much of this recently in Wisconsin.
So nationwide there is more corn being harvested than predicted, which keeps prices low, but in Wisconsin, increased rain and severe weather leads to lower yields. That’s a bad combination and a lot less revenue for state farmers, who will need support from other areas as a result.
Related to this, there was a bill discussed on Thursday in a State Senate committee that would extend the already $300 million+ Manufacturing and Agriculture tax cut to try to cover some types of crop losses.
Currently, a person may claim a tax credit on the basis of the person's income from manufacturing or agriculture. The starting point for calculating the credit is determining the person's production gross receipts, which are the gross receipts from the lease, rental, license, sale, exchange, or other disposition of tangible personal property that is either manufactured by the claimant on property assessed as manufacturing property or produced, grown, or extracted by the claimant on or from property assessed as agricultural property. Under the bill, insurance proceeds that are received by a person due to the destruction of, or damage to, crops are included in the person's production gross receipts and, therefore, included in the calculation of the credit's value.So now farmers that didn’t plant but got the insurance proceeds as a result will get to write off that extra money as well, without having to put in the time and cost of planting, maintaining and harvesting the crop. Seems like it could lead to some very bad incentives, although I suppose it might be a good thing if it can get crop prices up to a point that it makes it easier for remaining farmers to get by.
With the plummeting temperatures that hot today, I was curious to know if that might have the potential of additional claims of crop insurance from freezing. The UW Agronomy School says in order for corn to be in danger, temps need to drop below 32 degrees for “a few hours”, or freeze at 28 degrees. And with corn running 3-4 weeks behind schedule and less than 1/3 harvested, it's possible that our upcoming cold mid-October nights could wipe out a lot more than we'd normally see from this time of year.
If that happens, let’s see if that changes the forecasts, and leads to a jump in corn prices that might not be great at the store, but is needed for a lot of Midwestern farmers….if they’re able to get the corn out of the ground and to market in 2019.