With crop conditions still uncertain and the scheduled USDA June 30 planting report still nearly two weeks away, purchasing decisions for pork producers pose a big challenge. Nonetheless, certain factors may provide clues to help producers determine a strategy when considering input purchases.

In a Porkmag.com e-mail interview with Darrell Mark, Extension livestock marketing specialist, University of Nebraska-Lincoln, the economist sheds some light on the current situation and offers the following perspectives.

Q: What is the current situation on corn/soybean planting progress?

A: Clearly, planting progress was well behind the average pace and emergence lagged as a result. This was mostly led by wet conditions in the Eastern Corn Belt particularly Illinois, Indiana, Ohio, and parts of Missouri. Interestingly however, the crop emergence pace hasn’t been much different than last year -- the year with the second largest national corn yield in history.

It’s important to remember that if weather is right for the rest of the growing season, the corn crop could quickly "make up" for its late initial progress. Much of the Western Corn Belt has been receiving adequate rain and, except for some isolated areas with storm damage, the crop condition is quite good.

The corn crop condition index I calculate is currently at 377 nationally, where 100=very poor, 200=poor, 300=fair, 400=good and 500=excellent. This is up 6 points from the previous 5-year average and up 26 points from last year at this time. It appears that the market has come to this realization as well. We've seen December CME corn futures drop by $0.40 per bushel in the last week.

The extent to which we see much more drop in corn prices will depend on growing conditions through pollination and the final acreage numbers. At this point, it appears like soil moisture conditions in most areas are adequate going into the critical July timeframe, so if we see a couple of good rains in July, the corn yield shouldn't be at tremendous risk.

Q: What are your thoughts about the upcoming USDA planted acreage report?

A: It’s quite uncertain right now what the final acreage number will be. Many expect that corn acres will drop significantly from the 85 million acres in the prospective plantings report. This would be quite bullish to corn prices, and exactly what livestock producers don't need right now.

While it is certainly anyone's guess at this point, and very difficult to actually gauge, I believe that we won't see corn acres drop all that much from the March 31 planting intentions number of 85 million acres. The reason I say that is because the planting intentions report was about 7-8 million acres short on principle crop acres this year relative to actual planted acres from the previous two years. So, I had expected (before the growing season) to see corn and soybean acres grow by 2-3 million acres each, especially as crop prices rallied. However, because of planting difficulties in the Eastern Corn Belt, that expansion of acres probably didn't happen.

The extent to which corn acres may have switched to soybean acres is difficult to determine. It was the Eastern Corn Belt states that intended to grow more corn and less beans this year (opposite from most other states), based on the March intentions report. That suggests a lot of fields were fertilized for corn already, and if that is true, fewer acres would be switched.

Q: What are your current thoughts on hedging input costs?

A: In April, I said it would take a major weather event to put a significant weather-related premium in the market in May and June. I didn't think that would be a likely event and certainly not a lasting event -- but this did indeed happen. Unless the "perfect storm" of events continues to unfold with the crop conditions, I tend to think we may have put in the high during June though.

I still favor it not being a lasting event because crop conditions are improving relatively quickly. This isn't to imply that the corn market will drop a lot more though. There will continue to be a weather risk premium and other bullish factors for corn, including ethanol demand.

The supply and demand balance sheet is getting increasingly tight for the 2009/10 crop year. Ending stocks are now projected at 1.09 billion bushels. Even though I think some downside is possible for corn and soybeans and meal, I think livestock producers should remain protected against upside risk right now. Producers -- whether pork, poultry, dairy, or beef -- can't take another chance on being wrong when it comes to buying their grain inputs. Yet, they all need to benefit from some drop in corn and meal prices. So, I tend to favor call option strategies that put a ceiling price in on those inputs -- even though they are expensive.

Q: Looking ahead, do you see an opportunity for making a profit?

A: Producers need to actively be talking with their creditors and monitoring their financial condition and determining if they have enough equity to survive several more months of losses. Projections on finishing hogs through the first quarter of 2010 are negative, but it may be possible to lock in a profit margin later in 2010.

Q: Some want to increase the approved ethanol blend rate. How would that impact pork producers?

A: This would be negative for producers as it would increase demand for corn and other feedstocks for ethanol production.

Read more information on ethanol and its implications for corn prices.