The following marketing analysis is for the week ending April 2.
CORN — The market was treading water waiting for the March 31 Prospective Planting and Grain Stocks reports. And boy, were they worth the wait! Nothing had prepared us for the surprise the U.S. Department of Agriculture had in store.
The corn acreage estimate came in below the lowest estimate at just 91.144 million acres. The average estimate was 93.2 million and last year’s planted acreage was 90.82 million acres. It was also nearly 1 million acres less than the USDA’s estimate at their February Outlook Forum.
Grain stocks as of March 1 were 7.701 billion bushels vs. 7.767 billion bushels expected. This is the lowest March 1 stocks number in seven years. Last year we had 7.952 billion bushels on hand on March 1. This confirms we have not yet rationed this year’s corn and ending stocks are closer to 1.2-1.3 billion bushels. The USDA’s last estimate was 1.5 billion bushels. We won’t see the USDA 2021-22 balance sheet until the May 12 World Agriculture Supply and Demand Estimates report.
Corn locked up the 25-cent limit immediately after the report’s release. The run-up erased the loss for the month and saw the monthly continuous corn chart keep its eight-month streak of higher closes alive. New contract highs were set in virtually all the contracts with May at $5.85, July at $5.66.25, and December at $4.93 per bushel in the night session following the limit up move. We ended the holiday-shortened trading week on a mixed note with old crop posting small losses and new crop with decent gains. This emphasizes the more bullish number on the reports came from the acreage number.
The five top producing corn states of Iowa, Illinois, Indiana, Minnesota and Nebraska are all expected to have unchanged or lower acreage this year. Corn acreage in Minnesota this year is expected to stay at last year’s 8 million acres, Illinois is estimated to fall 400,000 to 10.9 million acres, Iowa down 400,000 at 13.2 million, North Dakota up 1.35 million to 3.3 million acres, South Dakota up 650,000 to 5.6 million, Nebraska down 300,000 at 9.9 million, Indiana down 200,000 at 5.2 million, and Wisconsin up 150,000 at 4.15 million corn acres.
Many expect final corn acres to be higher than the March 31 forecast. Historically, this has proven difficult to do. In recent history, the average acreage increase from the March to June report is 800,000 acres. However, if the weather cooperates and prices stay elevated, we should see at least a modest increase in acreage. Combined corn and soybean acreage at 178.7 million acres are well below the record of 180.3 million in 2017.
Corn stocks were slightly lower than anticipated at 7.701 billion bushels and the lowest in seven years. The trade was anticipating 7.767 billion bushels. On-farm bushels at 4.04 billion bushels are the lowest in seven years and account for 52.4 percent of total March 1 stocks. Last year, 56 percent of March 1 stocks were held on-farm. This is the lowest percentage since 2013 and the third-lowest since 1970.
Weekly export sales were in the lower half of expectations at 31.4 million bushels. Total sales have reached 2.587 billion bushels which are 99.5 percent of the USDA’s current 2.6 billion bushel outlook. China canceled a small cargo this week but still has 14.7 million metric tons of outstanding U.S. purchases to ship. New crop sales were 2.3 million bushels, bringing total new crop sales to 78.7 million vs. 69.3 million bushels last year.
Weekly ethanol production bounced 43,000 barrels per day higher this week to 965,000 bpd. Ethanol stocks were down 695,000 barrels at 21.1 million barrels. Margins fell a nickel to 7 cents per gallon. Gasoline demand rose to a 25-week high at 8.9 million bpd. Demand was 34 percent above last year’s Covid-19 demand slump, but 2.6 percent below the same week in 2019.
Outlook: The three-day holiday weekend shortened our trading week and may not have provided traders enough time to fully incorporate the new numbers into their balance sheets. One thing that was driven home this week was that we need to bring more acres into production this year or see next year’s ending stocks slide lower. Attention to spring planting weather will rise, but current forecasts predict favorable conditions. We need to further ration old crop stocks and add acres. Funds had trimmed their length going into the reports and have room to increase it. The trend is higher, but watch for signs higher acreage estimates are being incorporated if the weather cooperates.
Looking ahead to the April WASDE report, exports and feed usage need to be raised, and ethanol should at least hold steady if not increase slightly. This should lower the 2020-21 ending stocks number to the 1.1 to 1.3 billion bushel range.
For the week, May corn set a new contract high at $5.85 and was up 7.25 cents for the week at $5.59.75. July hit a new high at $5.66.25 and was up 9.5 cents at $5.45.25, and December corn reached a new high at $4.93 and was up 18 cents for the week at $4.84.5 per bushel.
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SOYBEANS — Soybeans got the same shock as corn with acres coming in at the low end of estimates and stocks near the average guess. Soybean acreage was forecast at 87.6 million acres vs. 90 million acres estimated. An acreage number of this size is the third-highest on record, but we need more to avoid further tightening on the balance sheet. Last year we planted 83.1 million acres. The forecast is 2.4 million acres less than what the USDA used at the February Outlook Forum. The combined corn and soybean acreage number is still the second-largest on record.
Soybean stocks as of March 1 were 1.564 billion bushels. This is the lowest stocks number on March 1 in the last five years. The average estimate was 1.534 billion bushels and last year we had 2.255 billion bushels available.
Soybean acres in Minnesota are estimated to be up 400,000 this year to 7.8 million acres, Illinois up 400,000 at 10.7 million, Iowa up 400,000 at 9.8 million, Indiana up 100,000 at 5.8 million, Missouri down 50,000 at 5.8 million, Nebraska up 300,000 at 5.5 million, North Dakota up 1.25 million at 7 million, and South Dakota up 750,000 to a record 5.7 million acres. This is the ninth time in 11 years the acreage number has come in less than the trade estimate. The March to June acreage number has increased in seven of the last 10 years, so there’s a slight correlation for this year’s intentions.
Regarding the stocks number, it was slightly higher than the trade projection. On-farm stocks were just 594 million bushels or 38 percent of total stocks, near the lowest percentage on record and compared to 45 percent last year. Off-farm stocks of 970 million at 62 percent of the total is the largest percentage on record. Last year, we had just over 1 billion total bushels on hand as of March 1. This year’s stocks decline was focused in Iowa and Illinois where their combined year-on-year decline accounted for 42 percent of the national drop. If you need to buy soybeans, you will have to pull them out of commercials’ hands where most stocks reside.
Weekly export sales were at the lower end of expectations at 3.9 million bushels. Total commitments stand at 2.235 billion bushels or 99.3 percent of the USDA’s 2.25 billion bushel export forecast. New crop sales were 4.8 million bushels. New crop commitments at 193.7 million are head and shoulders above last year’s 19.4 million bushels. The February National Agriculture Statistics Service Oilseed Crush report was 164.3 million bushels vs. 165.1 million bushels expected. This was the smallest monthly crush number since September 2019. Soyoil stocks were 2.309 billion pounds compared to estimates for 2.253 billion pounds.
Outlook: The market’s job is to increase planting intentions, reduce usage, and pull inventories to the market. Weather conditions for spring planting will be closely monitored as we can’t afford any glitches anywhere this year. Using this week’s numbers, private estimates for next year’s carryout plunges to an untenable sub-100 million bushels (some as low as 25 million bushels). Buckle up boys and girls, we’re in for a bumpy ride!
May soybeans failed to set a new contract high while most of the other months did in post-report trading. For the week, May soybeans were up 1.5 cents at $14.02, July was 5.5 cents higher at $13.96.75 (new contract high at $14.48.25), and November rocketed 56.5 cents higher to $12.63.75 per bushel (new contract high at $12.85).
Nystrom’s notes: Contract changes for the week as of the close on April 1: Chicago wheat fell 2.25 cents to $6.11, Kansas City was 3.25 cents lower at $5.65, and Minneapolis dropped 14.5 cents to $5.99.5 per bushel. The USDA reports were considered neutral to wheat with March 1 stocks at 1.324 billion bushels vs. 1.278 billion estimated. Global weather is seen as improving wheat development.
Phyllis Nystrom is a market analyst with CH S Hedging in St. Paul.