USDA released on Friday morning the results of two important surveys, the Grain Stocks and Acreage reports. Here are some report highlights and implications for corn supplies in 2012-13.
• The report shows that U.S. farmers planted 96.41 million acres with corn this past spring, almost a half-million more acres than the initial March survey indicated and 4.5 million acres more than a year ago. Despite the higher acres, however, the impact on the corn balance sheet will be minimal or even negative. This is because the survey also showed that harvested acres are expected to be lower than USDA’s June estimate (higher abandonment rates and silage use than earlier forecasts). Even with a half-million more planted acres than expected, harvested acres are now expected to be about 200,000 acres lower than a year ago.
• As expected, U.S. farmers took advantage of early wheat harvests to double crop soybeans. As a result, soybean plantings are well above the March survey indications and also above analyst estimates. U.S. farmers indicated they planted 76.08 million acres of soybeans, a half-million acres more than what analysts were expecting, and 1.1 million acres more than a year ago. While expected, the higher soybean acres should help moderate some of the bullishness in the soybean complex. But, as with corn, much will depend on weather patterns in the coming weeks. The soybean crop hasn’t been damaged as much as corn by the recent high temperatures, but it’s important to get some much-needed rain in the next 2-3 weeks.
• USDA grain stocks for June were relatively close to pre-report estimates. USDA reported that June 1 corn inventories were 3.148 billion bu., about 33 million bu. lower than pre-report estimates expected (-1.1%).
Other Factors to Watch: While these two reports are important in defining the potential size of the U.S. grain supply in 2012-13, markets will likely remain focused on short-term weather concerns. There’s mounting evidence that crops in the eastern Corn Belt are sustaining significant damage from current hot, dry weather. The crop progress report on Monday indicated that 17% of the corn crop in Illinois and 9% of the corn in Indiana was silking. The acres in the pollination phase will likely be even larger this week.
With little rain in the forecast for the eastern Corn Belt and temperatures over 100°, there’s significant concern of yield losses. Already, some private forecasts are indicating they expect corn yields for 2012-13 to be in the low 150 bu./acre.
Also important for the market will be the situation in Europe. A proposed solution to support banks directly buoyed risk trades Friday morning. This is generally bullish for commodities and could add more fuel to the rally in the grain complex.