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USDA's Quarterly Stocks Report: Bearish For Corn And Soybeans, But Planting Intentions Were Bullish For Both Crops

by Michael Moellenbeck, Vice President Grain Business Unit

Total planted acreage to major crops was forecasted at 251.4 million bushels versus 252.1 million acres last year. The trade was anticipating 254.2 million acres.

CORN
The March 29th Prospective Planting report caught everyone off guard with smaller than expected acreage at 88.03 million acres. The trade was looking for 89.42 million acres, with estimates ranging from 87.55 to 91.0 million acres. Last year, US growers planted 90.17 million corn acres. Corn acres overall were down 2.14 million acres from last year, most of it was in 6 key states. Illinois was down 200,000, Indiana was down 250,000, Kansas was down 400,000, Minnesota was down 550,000, Nebraska was down 250,000 and North Dakota was down 370,000 acres. This totals 2.02 million acres of the total decline.

In the Quarterly Stocks report, corn stocks were reported at 8.89 billion bushels which exceeded the range of 8.550 to 8.881 billion bushels. The average estimate was 8.703 billion bushels. Last year the March 1st stocks were 8.622 billion bushels. This year, 56% of the corn stocks are on-farm versus 57% on-farm last year.                                   

OUTLOOK: As we begin the month of April there is a bullish tone set to the market, although many expect the acreage number to increase in future reports. Fundamentally the market focus will be on Brazil’s safrinha corn crop, US planting pace, and US weather. Areas in the southern  US that should be planting, are delayed due to wet weather although the pace to date is ahead of normal. For the Midwest, forecasts are cool and wet into mid-April but it is expected US farmers will plant corn if the weather turns more favorable and if December corn futures stay above $4.00 per bushel. Last week’s acreage number narrows the gap for the US to have any significant weather problem this growing season. On the flip side, the funds are carrying a huge long position in corn as is the farmer. Both could limit the upside potential in futures without any major planting delay. For now, the trend is higher with limited downside expected. 
                       
SOYBEANS
The trade, and most everyone else, was not expecting the acreage report to show a smaller than expected bean acreage number. The prospective planting number of 88.98 million acres pushed November soybeans to a new contract high of $10.49 ¼ per bushel. The acreage figure was below the lowest trade estimate of 91.06 million acres, with a range of 89.9 to 92.6 million acres. The acreage is also below last year’s 90.14 million acres. Bean acres overall were down 1.1 million from last year with Iowa down 200,000, Kansas down 250,000, Minnesota down 250,000 acres, Nebraska down 100,000 acres and Ohio down 250,000 acres. Indiana was up 150,000 acres.

Soybean stocks as of March 1 were at the top end of the estimates at 2.107 billion bushels with 41% of the stocks on-farm. The average trade guess was 2.030 billion bushels, with estimates ranging from 1.810 to 2.110 billion bushels. Last year we had 1.739 billion bushels of bean stocks on March 1st with 38% on-farm. Similar to corn, the stocks report was bearish but the acreage report was bullish. 

The reports resulted in key reversals higher on all the daily soybean charts as all the attention was on the acreage number. May soybeans have retraced nearly two-thirds of the drop from the March high of $10.82 ½ (March 2) to the March low of $10.09 ¼ (March 23) with the weekly settlement at $10.44 ¾ per bushel. Price action leading up to the March 29th reports was lower as funds liquidated long positions in preparation for the reports and month and quarter end. Trade war concerns were also alive in the background. US soybeans have become competitive with Brazil through the fall time frame as Brazil’s values have jumped higher in anticipation of increased Chinese purchases.      

OUTLOOK: Now that soybean acres are nearly 2 million acres less than what was expected, will soybeans hold their gains and be able to continue to work higher despite larger stocks? Many believe we will see the soybean acreage number increase in the June report, such as we have in 5 of the last 6 years. Last year’s record bean acreage was the year we saw the March to June acreage remain steady. The March to June increases have ranged from 500,000 to 3.3 million acres. Higher prices will also encourage additional planting as technically beans are also in a bullish trend. Also US bean values are competitive with Brazil which may possibly help our bean exports to reduce the larger stocks. Trade discussions between the US and China need to be watched, but for now US soybeans are not being targeted for retaliation, but it is still on the table.

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