April 2, 2018
USDA CROP ACREAGE REPORT SURPRISES EXPERTS
On March 29, 2018, USDA released the “Prospective Plantings Report”, as well as the “Quarterly Grain Stocks Report”. These were very highly anticipated USDA Reports, due to the uncertainty in grain prices in recent months, the potential for another increase in U.S. soybean acreage in 2018, and the likelihood of even larger increases in USDA estimated grain stocks in the coming year. The USDA estimates for intended 2018 U.S. soybean and corn acreage came in well below the projections of most grain marketing analysts, which resulted in some short-term strength in the grain markets.
Typically, these late March USDA Reports are very critical to farm operators and grain traders because the Reports tend to have a high impact on grain market prices in the Spring and early Summer. This is the time of the year when many farm operators try to sell remaining grain inventories from the previous growing season, as well as look for opportunities to forward price a portion of the anticipated crop for the current year. In a majority of years, corn and soybean prices usually reach their peak-price from April until June, which is why the late March USDA Reports are so important.
Following are some highlights from the March 29th USDA Reports:
Corn — The Planting Intentions Report indicated an estimated 88 million acres of corn to be planted
in 2018, which is a decrease of 2 percent from the 90.2 million planted acres in 2017. The
intended 2018 corn aces are well below the 94 million acres in 2016, and are similar to the 88
million acres in 2015. The USDA corn acreage estimate was about 1.4 million acres below
the average grain trade estimate of near 89.4 million acres. The highest U.S. corn acreage
recorded in the March 31st estimate was 97.2 million acres in both 2012 and 2013. The 2018
corn acreage is expected to decline in Minnesota, North Dakota, and Kansas, and remain
close to steady in most other major corn producing States.
The total U.S. corn stocks on March 1, 2018, were listed at over 8.89 billion bushels, which is
up about 3 percent, compared to the 8.62 billion bushels on March 1, 2017. The March 1st
USDA estimate was toward the high end of the grain trade estimates prior to the Report.
Soybeans — For the first time since 1983, farmers will plant more soybean acres than corn acres, if
the projections in the March 29th USDA Planting Intentions Report hold true. 1983 was
the year that USDA instituted the “Payment-In-Kind” (PIK) program, which paid farmers
not to plant corn, in order to offset large U.S. grain surpluses.
According to the latest Report, U.S. producers will plant 89 million acres of soybeans in
2018, which is down 1.1 million acres from the 2017 record soybean acreage of 90.1
million acres in 2017, but is well above the 83.4 million planted acres in 2016. The
USDA projection for planted soybean acres was about 2 million acres lower than the
average grain trade estimates. The 2018 soybean acreage is expected to decrease from the
previous year in 20 of the 31 major soybean producing States.
Soybean stocks on March 1, 2018, were listed at 2.11 billion bushels, which up about 22
percent from 1.74 billion bushels on March 1, 2017, and compares to near 1.5 billion
bushels on March 1, 2016. The March 1 soybean stocks estimate came in near the high-
end of the pre-report estimates by grain traders.
Wheat — Intended total wheat plantings for 2018 are 47.3 million acres, which is up 3 percent from
the 2017 wheat acreage of just over 46 million acres. The 2018 U.S. wheat acreage would be
the second lowest since records began in 1919, trailing only the 2017 acreage. Total wheat
acreage exceeded 50 million acres as recently as 2016. Most of the increase in U.S. wheat
acreage is for Spring Wheat in States such as Minnesota and North Dakota.
Total wheat stocks on March 1, 2018, were listed at 1.49 billion bushels, which is down 10
percent from 1.66 billion bushels on March 1, 2017, but was close to grain trade estimates.
Cotton — Intended U.S. cotton plantings for 2018 are estimated at 13.5 million acres, which is up 5
percent from 2017 acreage levels, and would be at the highest level since 2011. Recent
changes to the government farm program payments for cotton have likely aided in the
enhancement of the 2018 cotton acreage.
The State-by-State Prospective Plantings Report for 2018 is also rather interesting. Minnesota corn growers are expected to plant 7.5 million acres of corn in 2018, which is down 7 percent from the 8.05 million acres planted in 2017. Minnesota farmers are expected to decrease their planted soybean acres by 3 percent in 2018 to 7.9 million acres; however, Minnesota farmers are intending to plant 1.6 million acres of Spring Wheat in 2018, which would be an increase of 38 percent. From the 2017 wheat acreage. The USDA Report was based on planting intentions as of March 1st; however, the potential for later than normal Spring planting dates in Minnesota and other Upper Midwest States may cause some of the planting intentions to change in the coming weeks.
The March 31st USDA Grain Stocks Report indicated that as of March 1, 2017, there were 5 billion bushels of corn and 855 million bushels of soybeans stored on farms in the U.S., which represents about 56 percent of the total corn stocks and 41 percent of the total soybean stocks. According to the USDA Report, there were 770 million bushels of corn and 115 million bushels of soybeans in on-farm storage in Minnesota on March 1, 2018. USDA does not survey the percentage of the bushels in on-farm storage that are forward priced for future delivery, as compared to bushels that are not priced. However, many private analysts feel that a much higher percentage of the corn bushels still in storage on March 1, 2018, may not be forward priced in 2018, as compared to other recent years.
On March 29, the day that the USDA Reports were released, December corn futures on the Chicago Board of Trade (CBOT) increased by 14 cents per bushel, closing at $4.11 per bushel. Both the CBOT December corn futures price and local forward contract prices in Southern Minnesota were near the highest levels achieved so far in 2018. Following the USDA Reports on March 29, November CBOT soybean futures prices closed 27 cents per bushel above the previous day, closing at $10.47 per bushel. This was also near the highest CBOT closing prices for November soybean futures in 2018.
Most grain analysts felt the dramatic reaction in the grain markets was primarily due to the surprise in the USDA planting intentions numbers for corn and soybeans. Producers should look for opportunities to take advantage of these improved grain prices, both to sell any remaining 2017 grain inventories, as well as to forward price some of the intended 2018 production. The rather large levels of grain stocks for both corn and soybeans, will likely keep market price rallies a bit “in-check”, and could potentially cause downward pressure on the grain markets later in the growing season.
**********************************************************************************
Note — For additional information contact Kent Thiesse, Farm Management Analyst and Senior
Vice President, MinnStar Bank, Lake Crystal, MN. (Phone — (507) 381-7960);
E-mail — kent.thiesse@minnstarbank.com)