Kub's Den

It's June, the most perfect time of year, and if this was a perfect year, the nation's cropland would already be striped with little green corn plants waving in the wind, and the nation's farmers would be cleaning out the last soybean seeds from their planters before parking them in the machine shed and going fishing.

It hasn't been a perfect year though. In reality, it's been pretty horrible -- each day has been either too cold and wet for planting or a rare window of breakneck frenzy to get some seed in the ground before the next storm system shuts everything down and sends everyone back to the shop, neurotically greasing zerks and counting seed boxes for the umpteenth time this year. The pace has been either zero or 100 miles per hour.

But does the market care? Does an imperfect planting experience translate into anything meaningful about production prospects and upcoming supply?

Looking at this spring's planting pace in percentage terms from each week's USDA Crop Progress report, we might not have noticed how much work is getting done during those brief windows of open-sky opportunity. North Dakota just had a big week: going from having only 20% of their corn crop planted on May 22 to having 56% planted before it started raining again on Sunday, May 29.

An even more jaw-dropping demonstration of planting speed took place in Iowa during the week of May 8-15, when the state's farmers advanced their corn planting progress by 43 percentage points, representing 5.4 million acres of the 12.6 million total acres they intend to plant to corn in 2022. That's 774,000 acres planted per day in that state. Both in percentage terms and overall acres terms, Iowa was followed by Illinois during that second week in May (advanced 40 percentage points, or 4.2 million of the 10.7 million total intended acres, or 611,000 acres per day). Pockets of the Corn Belt went from a near standstill in late April to a flat-out sprint in mid-May.

Compare that to Texas, which has a longer window of opportunity, and which didn't have the spring weather problems of the Midwest, so they carried on at a fairly even pace, planting between 15,000 to 40,000 acres per week most weeks between late February and late May.

Meanwhile, along the northern tier of the Corn Belt, farmers would have begged for a chance to plant grain at Texas' leisurely pace or even according to Iowa's May schedule. It has been so cold and wet for so long, we have now passed the 'final planting dates' to maintain full crop insurance coverage, and alarming quantities of intended corn acres remain unseeded:

-- 44% of North Dakota's corn (1.6 million out of 3.6 million intended)

-- 28% of Ohio's corn (938,000 out of 3.4 million intended)

-- 20% of Wisconsin's corn (740,000 out of 3.7 million intended)

-- 18% of Minnesota's corn (1.4 million out of 7.8 million intended)

-- 14% of South Dakota's corn (868,000 out of 6.2 million intended).

These pockets of the Corn Belt still haven't had their standstill-to-sprint moment and are waiting for a sufficient window of opportunity to open up.

Looking at those five states combined, the figures represent over 5.5 million acres of land intended for corn but still sitting unplanted so far. See Senators Pitch Plan to Keep Farmers Planting After Final Insurance Dates (https://www.dtnpf.com/…) by DTN Ag Policy Editor Chris Clayton for details on how USDA may encourage planting to continue this year no matter what the calendar says.

Under some circumstances or price scenarios, this wouldn't even be under consideration. If corn was globally abundant and worth $3 per bushel, would we be driving ourselves crazy and mudding it in past the insurance policy's "final planting date?" Heck, no!

Farmers who have been bogged down and frozen out so far this spring would take this opportunity to file a prevented planting insurance claim and receive some income that way. Those 5.5 million acres would likely be trimmed off the nation's overall production and this would be seen as bullish to the markets.

This year, however, the corn seed may still go in, one way or another. Crop insurance policies offer a 25-day "late planting period" beyond the "final plant date," during which coverage is reduced by 1% per day. When that coverage is based off February reference prices at $5.90 for corn and $14.33 for soybeans, with the potential for even higher harvest price references (new crop futures are currently $7.30 for corn and $15.44 for soybeans), it's worth going for it.

As the philosopher Taylor Swift once stated, "Players gonna play; haters gonna hate." Add to that: Farmers gonna farm. Determined Ukrainian farmers have demonstrated that axiom this spring, sowing 78% of their baseline spring crop acres (compared against 2021, according to their Ministry of Agrarian Policy and Food) despite all the challenges in that country. Determined U.S. farmers are likely to heed the market's signals and do the same, even in less-than-ideal conditions.

Therefore, production losses from the U.S. supply-and-demand table may not come from major losses in acreage, but rather from the marginal effects of lower yields in late-planted crops, which is far from certain. Depending how the summer heat and autumn harvest weather develops, it could even be good for the fields that are planted weeks late. It's unlikely, but possible.

In any case, this ambiguously bullish influence on new crop corn and soybean prices will be virtually impossible for the market to price in, if it's not already part of the historically lofty price levels. But one thing's for certain: Even this past week's impressive planting progress certainly shouldn't be interpreted as bearish. Even though it's June 1, there is still work to do.

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Comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of grain or grain futures or options involve substantial risk and are not suitable for everyone.

Elaine Kub, CFA is the author of "Mastering the Grain Markets: How Profits Are Really Made" and can be reached at masteringthegrainmarkets@gmail.com or on Twitter @elainekub.

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