Between this morning’s Acreage and Grain Stocks reports, the U.S. corn supply for the 2011-12 corn year is close to 0.5 billion bushels higher than the industry anticipated.
First, corn stocks in all positions as of June 1, 2011, totaled 3.67 billion bushels, down 15 percent from a year earlier. On-farm stocks at 1.68 billion bushels fell 21 percent from a year earlier, while off-farm stocks, at 1.99 billion bushels, are 9 percent lower. Grain stocks, however, were well above the average trade estimate of 3.3 billion bushels. “The big shocks are in the corn numbers,” says James Bower, Bower Trading, Lafayette, Ind.
Soybean stocks of 619 million bushels and wheat stocks of 861 million bushels were also well above expectations of 596 million bushels and 826 million bushels, respectively. “What that shows is that feed demand backed off this spring when prices were high, especially for cattle producers,” says Chad Hart, agricultural economist with Iowa State University. “Producers likely turned to unique alternative feed sources such as processed feed, byproducts, and bakery waste. They were searching for any alternative feed source.”
Projected corn acres of 92.3 million will also send shock waves through the market. Projected acreage is 5 percent stronger than last year and the second highest planted acreage since 1944, behind only 2007’s 93.5 million acres. Growers expect to harvest 84.9 million acres for grain, an increase of 4 percent from last year. The average trade estimate for corn acres was 90.8 million.
“I’m sure the report is a disappointment to corn bulls,” says Bower. “It shows us that in the Northern Hemisphere if the producer gets an opening, he or she has the horse power to make up (planting delays) in a big way.” According to the Acreage report, even with this year’s significant planting delays, U.S. producers planted 1.6 million more acres than they indicated in the March Prospective Plantings report.
“The markets will focus on the corn numbers, which are bearish,” says Bower. Without weather problems during the critical upcoming pollination period, which Bower expects to run from about July 11 to August 14 this year, December corn futures could fall to as low as $5.50 or $5.40, given today’s bearish numbers, he says.
“If you go through the report on a state-by-state basis, you can see the impact of (planting-season) weather on some states and how other states compensated for that,” says Hart. For instance, Illinois, Ohio, South Dakota, and North Dakota all lost acreage, while Iowa, Nebraska, and Minnesota gained acres.
The additional corn acres also came at the expense of soybean acreage. “Producers gave up beans and planted corn later than they normally would have in a more typical year,” Hart says. “Prices favored corn this spring and producers responded.” USDA pegged soybean planted acres at 75.2 million acres, down 3 percent from last year.
Yield will be a concern in many states moving forward, including Minnesota, North Dakota, and South Dakota, but other states like Iowa, where producers planted an additional 200,000 acres, and Nebraska could make up for yield losses elsewhere. “Minnesota corn got in, but it isn’t necessarily in the best condition,” says Hart, who will be revising his price forecast lower in the wake of today’s reports.
“The wildcard is the 500,000 added acres in Nebraska,” Hart says. “How much of it was planted in the (now-flooded) Missouri River valley?”