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By Sara Schafer,

On March 31, May corn futures surpassed $8. Since then, prices have stayed closed to that notable level not seen since 2013.

In the last 15 years nearby corn futures have only topped $8 six times.

A bullish set of fundamentals pushed corn prices to this high level, says Dan Basse, president of AgResource Company, and those factors could actually be getting more bullish.

"That seems hard to say when you've got corn sitting at $8 per bushel," he says.

What factors are at play? Three major forces:

1. A Shrinking South American Crop

This year, USDA is calling for record corn production from Brazil. For 2021/22, the country's corn crop is predicted to hit 116 million metric tons (mmt), which is larger than last year's crop by 33%.

Yet, severe drought conditions are impacting the Safrinha corn crop in Brazil, which is in its vegetative state and will be harvested between May and August.

Basse says his colleagues in Brazil are predicting the total Brazilian corn crop down to be only about 104 MMT.

"A lot of the key growing areas haven't had a meaningful rain for over 30 days," he says. "This is a big deal; this crop is being pulled downwards."

If the Brazilian corn crop is significantly smaller, Basse says the big questions are: Who will make up the production difference? Where will buyers turn?

"Beyond the U.S., there is no other place the world will go," he says.

2. U.S. Planting Delays

As of May 1, USDA estimates 14% of the U.S. corn crop has been planted. That compares to a five-year average of 33% planted. Last year, 42% was planted by May 1. This year's planting pace is the slowest since 2013.

"The only thing we can say with certainty is we are delayed," Basse says. "What late planting means is we have to have a lot of good things happen during the summer growing season."

Basse says after May 10, if the forecast is still preventing significant corn planting progress, the market will more heavily factor in the ramifications of a late-planted crop.

"On Monday (May 9), if we have 20% to 24% of the corn crop seeded, we will be pushed into a late-planted year," he says. "The record low is 17% in 1993."

For 2022, USDA is predicting a record national average corn yield of 181 bu. per acre. Last year the national corn yield was 177 bu. per acre.

"USDA is probably 4 bu. or 5 bu. too high on the average national yield because of planting dates," Basse says. "Even if we tie last year's corn yield, which I think is a stretch at this point, it's a fairly significant drop in production of around 350 million bushels."

USDA will release its monthly Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports on Thursday, May 12.

Basse says USDA will likely not adjust the corn yield in that report, nor the June report.

To view the complete report, click here.

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