Last week’s USDA Acreage Report – the season’s first hard look at reality rather than intention – caught the market by surprise. The estimated number of acres planted is up 2% (87.9 million acres) but significantly less than the trade anticipated.
“Much of the trade expected a higher corn acreage number based on early corn-planting progress and the March 31st planting intentions reported at 88.8 million acres,” explains Darrell Mark, University of Nebraska ag economist. “Ultimately, though, it appears corn growers elected to plant about 928,000 fewer acres to corn than they intended to last spring. Despite early planting in April, excess moisture conditions in mid-May limited some later corn plantings. Additionally, high corn input costs and a corn-soybean ratio that favored soybeans likely caused some growers to shift acres to soybeans. In fact, soybean planted acres for 2010 are estimated at an all-time record high 78.868 million acres.”
Likewise, corn stocks in all positions June 1 are estimated at 1% higher (4.31 billion bu.) which also came in lower than what analysts expected.
“This was about 288 million bu. less than the average trade pre-release estimate. It implies a usage of about 3.38 billion bu. from March through May, up about 25% from the March-May disappearance in 2009. Ramping up of ethanol use has contributed to this increased corn use,” Mark explained in last week’s Livestock Marketing Information Center In the Cattle Markets newsletter.
All told, corn futures closed last week up an average of 39¢ through the front six months, compared to the closing price June 29 before the reports came out. There’s plenty of potential upside to corn prices, too. Among them: crop conditions and the ultimate harvest; EPA’s ultimate decision on whether or not to increase the ethanol blend rate – the verdict is expected this fall.
On the other hand, Mark notes, “…the corn acreage, though smaller than expected, is still the second-largest corn planted acreage in decades (surpassed only by 2007). Additionally, USDA’s current trend-line yield forecast of 163.5 bu./acre is viewed as conservative by many crop analysts given the early planting date and excellent crop condition. Still, if realized, it would be the second highest-ever corn yield. Thus, it is quite possible to harvest the largest corn crop in history in 2010.
"Second, some aspects of demand are questionable, even though overall corn demand has been growing. Both cattle and hog industries continue to see contraction, thereby reducing their feed usage.
"Additionally, tighter margins in recent weeks for ethanol producers and the prospect of an expansion to only E12 instead of the expected E15 will limit corn demand in that industry. Finally, outside market influence (e.g., energy prices, stock market and currencies) have not been particularly supportive to corn prices.”
This Friday’s World Agriculture Supply and Demand Estimates report should offer more clarity.
For the week ending June 27, according to the National Agricultural Statistics Service:
Corn – 7% is at or beyond the silking stage, 3% more than last year and 2% more than average. Above-average temps promoted rapid phenological development of the crop in North Carolina, where progress was 30% ahead of the normal pace. 73% is in Good to Excellent condition, 1% more than a year ago.
Soybeans – 97% is planted, 2% more than last year and on par with average. With the exception of Illinois, Missouri and North Carolina, where progress had yet to reach 95%, planting was complete or nearly complete throughout much of the major soybean-producing regions. 93% has emerged, 3% more than last year and the same as average. 9% has bloomed, 5% ahead of last year and 1% ahead of the average. Blooming was underway in all estimating states except Wisconsin. Progress was most advanced in the Delta, where 32% or more of the crop was reported at the blooming stage or beyond. 67% is rated in Good or Excellent condition, 1% less than last year.
Winter wheat – 96% was at or beyond the heading stage, 2% less than last year and the average. Boosted by the return of near-normal temperatures, 41% or more of the crop in Idaho and Montana began heading during the week; however, overall progress in both states remained well behind normal. 38% is harvested, 5% ahead of last year, but 1% behind the average pace. 64% is in Good to Excellent condition, 19% more than last year.
Spring wheat – 29% was at or beyond the heading stage, 14% ahead of last year but 5% behind the five-year average. The most rapid progress was evident in Minnesota, South Dakota and Washington, where warmer than normal temperatures promoted heading of 21% or more during the week. 84% is in Good to Excellent condition, 8% more than last year.
Sorghum – 94% is planted, which is 2% ahead of last year and 1% ahead of normal. Planting was at or ahead of normal in all estimating states except New Mexico. 21% of the crop has headed, which is the same as last year but 1% less than the average. In Texas, sorghum fields in South Texas and the Lower Valley matured rapidly due to above average temperatures. 72% is in Good to Excellent condition, 20% more than the same time last year.
Oats – 74% of the crop is at or beyond the heading stage, 9% ahead of last year and 3% in front of the five-year average. The most significant progress was evident in South Dakota, where ideal growing conditions promoted head development of 22% during the week. 80% is reported in Good or Excellent condition, 20% more than at the same time a year ago.
Barley – 17% is at or beyond the heading stage, which is 6% ahead of last year but 13% behind the five-year average. The most significant delay was evident in Montana, where heading had yet to begin due to abnormally cool temp throughout much of the growing season and progress was 26% behind normal. 85% is reported in Good or Excellent condition, 3% more than at the same time a year ago.
Pasture – 66% of the nation’s pasture and range is rated as Good or Excellent, 9% more than at the same time last year. 10% is rated Poor or Very Poor, compared to 19% a year ago. States reporting more than 25% of pasture as Poor or Very Poor were: Arizona (38%); Maryland (41%); New Mexico (39%); and Virginia (30%).