USDA: Less Corn and Soybean Acres Than Expected, But Hither Stocks

In many ways I feel that I’m at the starting gate. Next week I will get all my equipment out and deal with all the usual problems you have when you start another year of cropping. All the nuances that were there late last November will surely show up in one form or another next week. Of course there’s that old guy that opens the shed, I just hope that I’ve written things down.

I don’t even know what season this will be for me as I’ve farmed all my life. Needless to say, it will be my 37th start to spring since I finished my first degree in agricultural economics. I know that that young man would not recognize the landscape today, but the current version of him is looking forward to another kick at the can. It is a new day.

In the grain markets it is also a new day. Today, March 29th, the USDA released its prospective plantings report. This report is one of the big three, along with the June 30th and early January reports. It reflects a look ahead at what US farmers will be planting this year. The USDA did not disappoint coming in with some surprising numbers that had the market looking the other way.

The USDA announced that there would be more soybeans planted in the United States this year than corn for the first time since 1983. The USDA said there would be 89 million soybean acres, 88 million acres of corn. I was a bit surprised by those numbers. I had expected corn to maintain its lead over soybeans and I had not expected soybeans to be that low. Corn acres were down 2.14 million from last year, which is the lowest acreage since 2015.

At first glance you would think it a bit of a bullish set of numbers with both crops acreage numbers coming in lower-than-expected. However, quarterly stocks were more than expected and the projected ending stocks for the old crop year are very high and we all know that they eventually turn into beginning stocks on the following year. Quarterly soybean stocks were pegged at a record 2.1 billion bushels,(up 21% from March 2017) while corn quarterly stocks were pegged at 8.89 billion bushels. (up 3% from March 2017)

When it comes to grain marketing I often say don’t look back! However, it’s hard not to look back at these numbers, as the old crop stocks are truly onerous with US exports sagging. For instance second-quarter disappearance has been down 9% from a year ago. It almost makes you think that maybe the Chinese are teaching our American friends a lesson buying more beans from Brazil. Is has to be something. We’ve talked about China’s insatiable demand for soybeans almost forever but clearly the demand for US soybeans is lagging. Rhetoric from the White House is surely not helping.

Clearly though, it seemed like the market didn’t want to look back as corn finished the day up $.14 cents on the old crop contract and $.15 in December 2018. In old crop soybeans the May contract finished up $.27 with the November 2018 new crop contract up $.31. Even wheat caught the fever up six cents across the board. You’ve got to wonder based on the exuberant market action whether this will continue. Remember, USDA is projecting ending stocks for soybeans to be over 500 million bushels. However, more private estimates are in the range from 700 to 900 million bushels, which is insane. In the rearview mirror is the biggest bear you ever saw.

It would seem illogical based on what we see in the rearview mirror that prices moved up on the day. However, the world isn’t quite what it seems. Argentina is hit badly by drought affecting both their corn and soybean production. There have been rumors of American corn being sourced into South American ports before the second crop is being harvested. We even have some Kumbaya moments on the geopolitical front with the leader of North Korea Kim Jung Un meeting with the Chinese President last week before a likely meeting with President Trump sometime this year. He’s no longer Mr. Rocket Man. That’s okay, but keep in mind its an example of how you think you know what’s going to happen, but you really don’t know anything at all. Ditto for all of these grains and oilseeds we are about to produce.

So we move on. I get all my machinery in ready position. I put all the wisdom that I’ve learned over the last 35 years to work. I’ve got a big bear in the rearview mirror. Of course, I haven’t even started yet and hardly anybody else in the northern hemisphere has as well. Mother nature will determine the size and scope of the 2018 crop. Over the last five years it’s been about benign weather. If that happens again, all bets are off. One of these years she might grow angry, but of course we never know when that will be. The challenge will remain to measure all of these marketing factors and market our grain where we are comfortable and profitable. That seems to always work.

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