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USDA Surprises Drive Corn Prices Higher

original farmdoc Daily article

by Todd Hubbs, ILLINOIS Extension

The Acreage and Grain Stocks reports, released on June 30, produced some surprises for the corn market. The drop in acreage spurred a rally in corn prices and injected some optimism into the corn outlook moving into the 2020 marketing year. The market turns to weather forecasts and the upcoming WASDE report for price formation over the short term.




Corn producers reported they planted or intended to plant 92.01 million acres of corn this year, 2.31 million more than planted in 2019. Corn planted acres came in 3.2 million acres lower than the average trade guess and 4.98 million acres smaller than March planting intentions. Compared to March planting intentions in major producing states, the June survey revealed lower corn acres in all states. In particular, the western Corn Belt saw substantial acreage reductions with North Dakota (800,000 acres), South Dakota (600,000), and Nebraska (700,000) leading the way. The eastern Corn Belt saw one million acres of corn dropped from March intentions with Illinois and Indiana at 400 thousand acres each. The five million acres drop in corn acres did not move into other principal crops and hints at expanded prevent plant acreage for corn this year.

Producer intentions to plant principal crop acreage show a 9.3 million acre increase from 2019. The USDA estimates that acreage planted to principal crops will total 311.9 million acres. The planned increase in total planted acreage from a year ago came from increases in feed grains and soybeans. Sorghum acreage came in 355,000 acres higher than a year ago at 5.62 million acres. Barley and oats increased by 76,000 and 324,000 acres, respectively. Soybean planting intentions indicated farmers plan to plant 83.8 million acres of soybeans, up 7.7 million acres from 2019. The soybean acreage came in at the low end of market expectations. An additional 2.24 million acres of corn remain unplanted at the time of the survey and brings into question whether those acres may end up in alternative crops or unplanted. The surprise in corn planted acreage led to a strong rally in corn prices. The market’s focus now turns to demand and weather.

While the Acreage report revealed a positive surprise for corn prices, the June 1 stocks report came in much higher than expected. June 1 corn stocks came in at 5.224 billion bushels, slightly higher than last year and about 273 million bushels larger than the average trade guess. The higher than expected stocks total revealed a lower level of feed use in the third quarter of the marketing year. Feed and residual use during the first three quarters of the marketing year sits at 4.729 billion bushels. To reach the projected 5.7 billion bushels of corn, the USDA projects for feed and residual during this marketing year, feed and residual use in the fourth quarter must equal 971 million bushels. Fourth quarter feed and residual use has not equaled that level since the 2005–06 marketing year. Based on current stocks estimate, it appears feed and residual use this year may not reach the projection of 5.7 billion bushels and may see the USDA lower the estimate in the next WASDE report on July 10.

A lower feed and residual amount points toward a larger carry out into the next marketing year. The potential for the current marketing year ending stocks eclipsing 2.2 billion bushels, while not sure, looks high. Ethanol production continues to recover from the weakness seen in April and May. Corn use for ethanol in the third quarter totaled 955 million bushels, down 387 million bushels from the third quarter of the last marketing year. For the week ending June 26, ethanol production came in at 900 thousand barrels a day, up almost 18 percent from a month ago. The recent uptick in Covid–19 cases and subsequent policies enacted around the country to fight the spread insert a considerable level of uncertainty into ethanol use projections. Corn use for ethanol may flatten out as the virus’s resurgence mitigates economic activity during the peak driving season and may carry over into the next marketing year. An expectation of USDA lowering corn use for ethanol by 50 million bushels in the next WASDE report seems reasonable.

Corn exports appear on track to hit the USDA estimate of 1.775 billion bushels for the current marketing year. Outstanding sales as of June 25 sit at 332 million bushels. Exports through June 25 for the marketing year total near 1.38 billion bushels. While the export pace sits slightly below the USDA estimate, some light Chinese buying and strong domestic prices in Brazil hold positives for corn exports. Higher corn prices and the potential for slow global growth may prevent an acceleration of exports as the calendar moves into the next marketing year.

A higher carry out, despite lower acreage, places an added emphasis on yield potential. Some dryness in major corn-producing areas looks feasible over the near term. The recent drought monitor showed areas in North Dakota, Illinois, and Indiana poised to come under stress if dryness continues. The overall impact on the crop is challenging to predict now. An extended dry period as the early-planted crop moves into pollination will push corn yields lower. The projection for harvested corn acres sits at 84 million acres, 2.7 million more than harvested in 2019. If USDA’s yield projection of 178.5 comes to fruition, corn production comes in near 15.0 billion bushels with the present acreage intentions, up around 1.37 billion bushels from 2019.

Corn prices already reflect lower acreage and weaker demand. Subsequent rallies in corn prices rely on the weather. The prospect of the market building a weather premium seems high over the next week given the current weather forecast.

June Acreage Report Heightens Uncertainty

by Todd Hubbs, University of Illinois Extension
link to farmdocDaily article and video

On June 28, the USDA released the Acreage and Grain Stocks reports. While the Grain Stocks report provided support for both corn and soybeans, the Acreage report indicated higher than expected corn acres and lower than expected soybean acres. The acreage numbers injected a substantial amount of uncertainty into both markets that appears set to stay in place throughout the summer.


The 2019 June USDA Acreage Report rocked the corn market. University of Illinois Agricultural Economist Todd Hubbs explores those numbers in this interview with ILLINOIS Extension Farm Broadcaster Todd Gleason.

A dramatic drop in principal crop acreage provided one of the many surprises in the Acreage report released on Friday. Driven by much lower soybean and wheat acreage, total principal crop acreage came in at 309.3 million acres, down 6.1 million acres from the March Prospective Planting report. Principal crop acreage estimates decreased by 10.3 million acres from 2018 totals. Significant increases over last year’s acreage occurred in corn (2.57 million acres) and barley acreage (314,000 acres). The vast majority of crops witnessed acreage decreases from last year. Soybean acreage led the way with a 9.2 million acre decrease. Wheat acreage came in down 2.19 million acres.

An extraordinary year for corn production took another unexpected turn on Friday. Corn producers reported they intended to plant 91.7 million acres of corn this year. Corn planted acres came in 1.1 million acres lower than March planting intentions, but well above expectations due to delayed planting. When compared to March planting intentions in major producing states, the June survey revealed higher corn acres in Kentucky (220,000 acres), Kansas (200,000 acres), and Nebraska (300,000 acres). Acreage lower than March intentions in South Dakota (1.2 million acres) and North Dakota (350,000 acres) offset gains seen in other areas of the western Corn Belt. Surprisingly, the major producing states in the eastern Corn Belt saw slight to no changes from the March intentions.

The USDA reported 16.7 percent of the corn acreage (15.3 million acres) remained unplanted as of the survey period and indicated an intention to re-interview 13 of the 18 major corn-producing states in July for the August production report. The prospect of considerable prevented planting acreage in the eastern Corn Belt places the 91.7 million acres reported in the June report in question. The shift out of soybeans and most feed grains may indicate an expansion of the base corn acreage intended for planting in 2019. A lack of clarity about prevented planting acreage reported in the June survey window remains a concern and points toward further downward revisions in the August Crop Production report.

The corn stocks report provided some positive news for corn use. June 1 corn stocks came in at 5.2 billion bushels, nearly 103 million bushels lower than last year and 130 million bushels smaller than the average trade guess. Estimation of total disappearance during the quarter is 3.41 billion bushels. Estimated third quarter feed and residual use come in at 1.13 million bushels. Estimates of feed and residual use during the first three quarters of the marketing year sits at 4.615 billion bushels. To reach the projected 5.3 billion bushels of corn projected for feed and residual this marketing year, feed and residual use in the fourth quarter must equal 685 million bushels. Based on current stocks estimate, it appears feed and residual use this year is on track to hit the current USDA projection.

Soybean producers intended to plant 80 million acres of soybeans. The soybean acreage intentions came in below market expectations. Soybean planted acres fell by 4.6 million acres from the March planting intentions. At the time of the survey in early June, producers indicated that 41.2 percent of the intended soybean acreage (33 million acres) remained unplanted. Soybean acreage came in lower than last year’s totals in every state that reported in the June survey. The most substantial adjustments came in South Dakota (1.25 million acres), North Dakota (1 million acres), Iowa (900,000 acres), and Minnesota (900,000 acres). The substantial drop in soybean acreage may indicate issues with planting, but the large totals left to plant place the soybean acreage estimate in question as well. USDA plans to re-interview 14 of the 18 major soybean-producing states in July.

The June 1 soybean stocks estimate indicated a record 1.79 billion bushels, up 571 million bushels from last year. The stocks estimate came in 71 million bushels below market expectations. To meet the current USDA projection for soybean ending stocks, 720 million bushels of use is necessary for the fourth quarter. Despite the continued uncertainty in trade negotiations and record stocks, June 1 soybean stocks are neutral for soybean prices as soybean consumption maintains a pace to meet USDA projections for the marketing year.

Corn futures prices saw a dramatic drop with the release of the Acreage report. Soybean prices drove higher on the lower supply expected under reduced acreage. Uncertainty regarding corn and soybean acreage looks to continue through the August production report. If the corn acreage total ends up at the reported level in the June Acreage report, the prospect for corn yield moves to the forefront of supply expectations this year. By re-interviewing many major producing states for both corn and soybean acreage, USDA may be signaling revisions to come.

Crop Progress & June Acreage Could be Really Bearish

There is a rule of thumb for marketing that says “Consider the crop year normal until that is no longer the case.” Yesterday’s USDA Weekly Crop Progress report - despite the rainy weather - tells us the nation’s farmers are on pace this season. They’ve planted 84% of the corn crop and 53% of the soybeans. For University of Illinois Agricultural Economist Todd Hubbs this suggests, at a minimum, farmers need to really think about making new crop soybean sales prior to the USDA’s June 30th Acreage Report.

Hubbs writes about commodity prices each week for the University of Illinois. Those articles are posted to the farmdocDaily website each Monday.