Tuesday, March 08, 2011
La Nina And Its Impact On Your 2011 Crop Revenue
How much of your 2011 crop have you marketed, compared to how much you will be producing? Of course, you cannot answer that question until it is in the bin, unless you have crop insurance protection. But questions are being raised about the 2011 growing season weather and its ability to fill ears and pods.
The forecast for the coming crop year issued Friday by Iowa State Meteorologist Elwynn Taylor may have caused crop insurance agents to conduct land office business. Taylor’s forecast of a national average corn yield of 148 bushels, based on current La Nina weather data, would be a bit of a shocker if it comes to fruition.
His weather and crop comment late Friday stemmed from observations by meteorologist Klaus Wolter about the continuing strength of the La Nina weather system, which he says is the 3rd strongest in the past 60 years. It was described as stronger than 1955 and slightly weaker than 1974 which diminished corn yields.
Taylor says March is a pivotal month for La Nina and it could either strengthen or weaken, but he says as of now, he’s computing the national corn yield at 148 bushels. What will that mean for price? 148 bushels would be slightly below the low range projected by Iowa State marketing specialist Bob Wisner. Wisner’s low range yield for 2011 is 152 bushels per acre which would yield less than 13.5 billion bushels with a 91.5 million planted acres. With expected consumption and a 5% carryover, Wisner says the average harvest price would be $6.75 and $6.50 for the marketing year average.
In his Marketing Strategies newsletter, Iowa State economist Steven Johnson says with the current corn and soybean stocks as tight as they are already, the 2011 growing season weather will be watched closely to determine whether global stocks can be rebuilt.
Taylor and his colleague Klaus Wolter have been watching the Southern Oscillation Index. The SOI shows variations in air pressure in the western Pacific where sea surface temperatures convert air masses into innocent winds or strong weather systems that either drench the Cornbelt with rainfall or dry it out. Johnson says Taylor predicts a 70% chance of a yield that is below the trend level of 160 bushels. Taylor’s calculations with the short yield are a $7.42 harvest price, but a $5.70 harvest price if the current La Nina weakens and fades by May, with the likelihood the trend yield will be reached.
Johnson advises farmers to manage the risk of a 148 national yield with the help of crop insurance. Suggesting the use of Revenue Protection with the $6.01 guaranteed price, he says, “Pre-harvest sales above this $6.01/bu. December corn futures price level should provide a level of comfort in combining crop insurance and pre-harvest marketing using bushels that can be committed to delivery.” He says the Yield Protection and the Revenue Protection with the harvest price exclusion will guarantee bushels, but not a price, should the price rise throughout the growing season to reflect a short crop. That would not allow a producer to buy replacement bushels at an economic level.
Summary:
LaNina remains strongly entrenched and a threat to growing season weather in the Cornbelt, which means a dry year, enough to reduce the national average corn yield to 148 bushels per acre. Farm operators who have been marketing their new crop should have a revenue form of crop insurance protection to achieve their goals for the year.
Posted by Stu Ellis on 03/08 at 12:00 AM | Permalink