The U.S. Department of Agriculture’s quarterly Grain Stocks report and annual Prospective Planting report delivered surprises to the corn market. A greater-than-expected corn-stocks number combined with greater-than-expected planted acreage of corn gave bearish news to corn prices. Soybean stocks and acreage came in neutral to slightly positive for soybean prices.
March 1 corn stocks came in at 8.605 billion bushels compared to an average trade guess of 8.335 billion bushels. The stocks estimate suggested feed and residual use of corn during the first half of the 2018-2019 marketing year came in 8 percent less than the previous marketing year. Lesser feed and residual use materialized despite a sizable livestock herd and reduced production of distiller’s grains on weakening ethanol grind. An increased stocks estimate suggests the potential for underestimation of the 2018 crop size and supports the notion of declining demand for corn during the second quarter of the marketing year.
Corn producers reported intentions to plant 92.8 million acres of corn this year, 3.66 million more than planted the previous year. The reported corn acreage exceeded trade expectations by 1.4 million acres. The intention to increase corn acreage is widespread throughout the Corn Belt. Acreage increased 400,000 acres in Iowa, 200,000 in Illinois and 150,000 in Indiana. Significant increases in corn-acreage intentions occurred in the Northern Plains, with North Dakota intending to plant 900,000 additional acres and South Dakota increasing by 700,000 acres. Overall the top-10 corn-producing states increased acreage by 2.05 million acres.
If the intention to plant 92.8 million acres materializes, harvested acreage for grain may be close to 85.4 million acres. A U.S. average yield near 174.6 bushels per acre leads to a projection of production in 2019 of 14.9 billion bushels. Corn production at that level exceeds current marketing-year-use projections by 300,000 bushels. Corn use is expected to be more in the 2019-2020 marketing year, but the current implication of slowing use in the current marketing year and a larger crop next year is more ending stocks.
The soybean-stocks report appears neutral for soybean prices. March 1 soybean-stocks estimates indicated 2.72 billion bushels, which came in at more than trade expectations by 33 million bushels. The stocks estimate implies seed and residual use of soybeans during the first half of the marketing year at 203 million bushels. Seed and residual use is increasing from the previous year and at the greatest levels since the 2014-2015 marketing year. The implications for soybean use this marketing year remain at previous levels and continue to rely on a resolution to trade issues.
Soybean-planting intentions indicated farmers plan to plant 84.6 million acres of soybeans, a decrease of 4.6 million acres from the previous year. The soybean-acreage intentions came in at 1.55 million acres less than market expectations. Intentions to reduce soybean acreage span most major production regions. In major producing states, the intention to plant fewer soybean acres is indicated by 300,000 fewer acres in Illinois, 600,000 in Iowa and 500,000 in Minnesota.
If 84.6 million acres are planted, harvested acreage could be close to 83.6 million acres. At a U.S. average yield of 49.4 bushels per acre, 2019 production projects to 4.13 billion bushels. That’s 88 million bushels larger than current marketing-year-use projections. Without a significant change in soybean use during the next year, ending stocks appear set to increase slightly.
In addition to the allocation of acreage to corn and soybeans, the magnitude of total principal-crop acreage shows a 4.2-million-acre decrease from 2018. The USDA estimates that acreage planted to principal crops totals 315.4 million acres. The planned reduction in total planted acreage from that of a year ago showed in feed-grain crops other than corn. Sorghum acreage is projected to be 555,000 acres less than a year ago, at 5.18 million acres. Wheat acreage decreased 2 million acres to 45.8 million acres. Oat acreage declined by 191,000 acres. Acreage of oilseeds other than soybeans is projected to decrease by 15,000 acres. Harvested acreage of hay is expected to increase by 215,000 acres.
The surprise in March 1 stocks and acreage created a bearish scenario for corn prices. The large corn-stock number influences the consumption of corn in the feed and residual category directly during the current marketing year. An expectation of reduced feed and residual use is prudent moving forward. Without a resolution to the trade dispute, growth in ending stocks in both corn and soybeans appears feasible during the next year.
Planting intentions confirmed the belief that farmers would switch to corn production in 2019. Depending on field conditions during the planting season and the changing price relationship between crops, the possibility of greater soybean acreage than reported in March exists. The June Acreage report will provide more clarification.