Thursday, April 01, 2010
USDA Reports Reflect Abundance And More On The Way
USDA opened the door on a bin full of data Wednesday and what spilled out was spoiled, according to the market that turned away its nose. The Quarterly Grain Stocks report indicated more on hand than was expected and the Planting Prospects report indicated more intended corn and soybean acreage than was expected. Here are the details…The Quarterly Stocks Report estimated March 1 corn stocks were 7.69 billion bushels, 11% more than the same time last year, but slightly above the average trade guess of 7.5 billion. Disappearance was 210 million bushels more than the same quarter last year. Since USDA considers field storage as stocks, the unharvested corn of the Dakotas was also included in the estimate.
Soybean stocks totaled 1.27 billion bushels, down 2% from the same period in 2009, but at the top end of the range of what the market was expecting. Disappearance was 1.07 billion bushels, 10% more than the same quarter last year. The large amount of soybean stocks overshadowed the projected soybean acreage which was friendly to the market.
Wheat stocks were estimated at 1.35 billion bushels, up 30% from the same quarter last year, and near the average of trader expectations of 1.36 billion. Total disappearance was 429 million bushels, up 12% from last year at the same time.
University of Missouri marketing specialist Melvin Brees says in his analysis, “The big news in these reports is the larger than expected corn and soybean stocks. March 1 corn stocks are above the average of trade estimates and increased over last year, suggesting corn supplies are more than adequate. Although March 1 soybean stocks are two percent below last year’s stocks, they were higher than most expected at the top end of trade expectations and at the time of year when export demand is expected to slow.” Brees says the market will soon digest the numbers and move toward planting weather and outside markets to guide corn futures and use Chinese demand and the South American supply to guide soybean futures.
The Prospective Plantings Report forecast 88.798 million acres of corn compared to the 86.5 million planted in 2009. USDA expects substantial acreage increases of 600,000 in Illinois and Kansas, 300,000 in Missouri, and 350,000 in Ohio. The largest decreases are expected in Iowa, down 200,000 acres, and Texas, down 150,000 acres. USDA reports, “Planted acreage is expected to be up in many States due to reduced winter wheat acreage and expectations of improved net returns.”
Soybean planting is expected by USDA to total 78.098 million acres, compared to the 77.4 million last year. If achieved, it would be a record high acreage for soybeans. USDA says “
Acreage increases of 100,000 acres are expected in Illinois, 300,000 in Iowa, 400,000 in Kansas, 100,000 in Nebraska, 100,000 in North Dakota, and 150,000 acres in South Dakota. The largest decreases are expected in Georgia and North Carolina, both 150,000 acres less than 2009.” USDA also reports, “Meanwhile, planted area is expected to decline from last year or remain the same across the Delta and Southeastern States with decreases of more than 100,000 acres expected in Arkansas, Georgia, North Carolina, and Tennessee. If intentions are realized, the planted acreage in Kansas, North Dakota, and Pennsylvania will be the largest on record.”
The 2010 wheat crop is forecast by USDA at 53.8 million acres, a 9% drop from last year. “The 2010 winter wheat planted area is estimated at 37.7 million acres, down 13% from 2009 but up 2% from the Winter Wheat Seedings report. This is the lowest United States total since 1970 and record lows are estimated in Illinois, Indiana, Missouri, Nebraska, and Ohio. States with notable acreage increases from the previous estimate were Nebraska and Texas, up 100,000 and 200,000 acres, respectively.” Many unplanted wheat acres will find corn and beans in them for the 2010 growing season.
Summary:
USDA’s Quarterly Grain Stocks report indicated larger amounts of corn and soybeans on hand than what the trade expected, even by including unharvested acreage in the northwestern Cornbelt. While the projected soybean acreage would be a record amount if planted, it was less than what the trade expected, so the soybean acreage was friendlier to the market than the stocks report for soybeans. The high levels of corn and bean acres expected to be planted this spring are primarily from wheat that did not get planted last fall, and the lack of fertilizer application that would tend to control the crop being planted.
Posted by Stu Ellis on 04/01 at 01:38 AM | Permalink
Comments
Posted by: Freeport, IL at April 7, 2010 10:10PM
An increase in 2009-10 corn production may just result in higher prices.
Do not be too surprised if corn production increases in Friday’s report. Should production increase, it might result in higher prices. An increase in production is one explanation that helps balance the March stocks number with our expected corn use. A higher production, in our model, implies higher corn use in the first half of the year. That higher use results in higher use in the second half and total year use. In the model corn use should increase faster than production reducing ending stocks thus higher prices. It is counterintuitive but just might happen.