By Michael Hirtzer
CHICAGO (Reuters) - Ethan Cox is sowing corn on his 5,000-acre Illinois farm earlier than ever this year, betting that the premium he may collect for delivering an early crop is worth the risk of a damaging late-spring frost.
Lured into the fields by what is so far the warmest March since records began in 1871, Cox is toiling alongside dozens of farmers across the Midwest who have begun seeding what may be a record crop weeks earlier than usual, according to agronomists, farm managers and analysts who keep close tabs on farm activity.
His crop may miss the peak summer heat of July and reap an extra 60 cents a bushel in September if his gamble pays off. Robust ethanol demand and years of low domestic inventories have placed a near-record premium on corn that can be delivered at the end of summer, when grain bins are empty and before the main harvest.
But the risks are high too: planting so early means forsaking some types of crop insurance; and despite the exceptionally mild winter, odds favor another chill at least once this year. Only once in the last century has the Midwest avoided frost between mid-March and mid-April.
"It's going in good but we have fear that it might come too quick and a frost will come and kill it," Cox said as he took a break from seeding the first 400 acres on his farm in Greene County southwest of Springfield.
While the vast majority of farmers will opt to wait until nearer April 15, the average last freeze date, anecdotal reports suggest a record number have already begun.
In theory, the early push puts more of the crop at the mercy of mother nature; in Chicago, however, traders are reckoning that eager farmers may decide to seed even more acres early with corn rather than saving space for soy.
The December corn contract, which reflects a harvest-time price, declined each day this week, shedding 3.4 percent to $5.55 per bushel, a two-week low, in a technical sell-off in addition to ideas aggressive planting will produce ample corn.
"The weather is so good thus far that there are reports, and we suspect very good reports, of corn being already planted in Iowa, Nebraska and Illinois," said influential investor Dennis Gartman.
He told Reuters this week that he sold a "very large" portion of his corn position.
Chicago traders said investment funds sold an estimated 36,000 contracts this week, the largest sell-off yet this year.
The stakes are higher than ever this year. Every bushel of a bumper U.S. corn crop is needed to replenish corn stocks, which are expected to shrink to the smallest in 16 years before the autumn harvest. Any harvest shortfall could send prices surging back toward their record of $8 a bushel, driving up costs for consumers and meat companies.
LURE OF SUMMER
Summer-like conditions of clear skies and temperatures in the 70s and 80s degrees Fahrenheit have prevailed this month to stir farm activity weeks earlier than usual, farm experts say.
Soil temperatures across Illinois are above 50 degrees Fahrenheit (10 degrees Celsius), which is necessary to promote seed germination, according to the Illinois State Water Survey.
It is unclear how many farmers have begun planting so far. USDA does not issue weekly planting updates until after its prospective plantings report, due March 30. That report estimates seeding intentions of the major U.S. crops.
"We probably have several thousand acres planted statewide, in that low 1-percent range," said John Hawkins, spokesman of the Illinois Farm Bureau. "It's more than a handful but less than a mad rush."
The state harvested 12.4 million acres last fall.
Last year, USDA put out its first corn plantings estimate on April 11, estimating overall plantings at 3 percent complete, with Illinois 1 percent done.
Most farmers in the Corn Belt do not begin planting corn until the first or second week of April, both because of the likelihood of a killing frost and for insurance purposes.
Crop insurance policies do not cover replanting costs if farmers plant before the earliest seeding date, which in most of Illinois, Indiana and Ohio is April 6. For top corn growing state Iowa, that date is April 11.
Corn plants can emerge in as little as five days after planting and once the plant is out of the ground it is at risk of being damaged by a frost or a hard freeze. A "hard freeze" of temperatures at or below 28 degrees F (-2 degrees Celsius) could kill a plant in less than five minutes.
The average last freeze in central Illinois falls on April 15, according to National Weather Service meteorologist Chris Geelhart. In 1999, the last freeze was on March 29; in 2005, the ground froze in early May.
Elwynn Taylor, Iowa's state climatologist, said that only once, in 1946, during the past 100 years has there not been a frost between mid-March and mid-April.
"There's no reason for it not to be two times out of a hundred. We are hotter now than we were in 1936, so we are beating the Dust Bowl for this time of year," Taylor said.
RACE TO EARLY HARVEST
Plantings also got off to early starts and quick finishes in 2004 and 2006. Yield results varied, jumping to 160.3 bushels per acre in 2004, up 18 bpa from the previous year, while the yield in 2006 climbed only 1.2 bpa from the previous year.
Early planted corn can begin pollinating by June, allowing the plants to go through a crucial development stage before the hot weather of July.
Meteorologists widely expect temperatures to remain above normal for the next week to 10 days, with the extended 14-day day forecast also hinting at the continuation of warm weather.
But the greater rationale for early planting is the opportunity to capture a premium for grains delivered to buyers like Cargill Inc or Bunge Ltd before the height of harvest.
Tight supplies last summer pushed cash corn prices to record highs across the region as grain buyers scrambled for the grain to supply the first purchases of U.S. corn by China in four years. Increasing demand from ethanol refineries, which now use 40 percent of the domestic crop, also has increased demand.
"This early planting means harvest will likely be early as well," said Karl Setzer, analyst at MaxYield Cooperative in West Bend, Iowa. "A result of this will be the ability to pick up the (price) increase in the market between old and new crop. In many cases this will add $1.50 of revenue to a bushel of corn."
Cox knows that too. He inked a contract to deliver 40,000 bushels, roughly 15 percent of his harvest, to an export terminal owned by CGB Enterprises Inc along the Illinois River in Naples.
If he delivers the grain in the first half of September, he will earn a 60-cent-per-bushel premium, bringing his total to $7.60 per bushel, a haul of $304,000. It would be his most valuable contract ever. If the corn is not ready until the second half of the month, he forfeits the premium.
Cox, however, also has a second motive behind the rush.
"Our oldest daughter is expecting her second grandchild around the first of April," he says, "so I wouldn't mind getting the work done so I can spend a few days with them."
(Additional reporting by Julie Ingwersen; Editing by Bob Burgdorfer)