Acreage Shifting, but Watch Out for Stocks and Weather

March 28, 2012 09:12 PM
 
USDA young corn

 

Corn acreage may climb to 95 million acres this spring. Then again, maybe not.
 
"We're looking for 93.6 million acres," Bill Tierney, chief economist at AgResource Company, Chicago, told a CME Group conference March 27.
 
Some surveys and analysts have projected corn planting at about 95 million acres, up from 91.9 million last year.
 
Allendale, Inc., McHenry, Ill., estimated from its annual producer survey that corn acreage will reach 95 million acres, soybean plantings will slip slightly to 74.5 million acres, and total wheat plantings will gain 2.2 million acres to 56.6 million.
 
A Dow Jones Newswires survey of analysts put the average estimates at 94.7 million acres of corn, 75.5 million of soybeans, and 57.6 million of all wheat.
 
Whether Tierney and AgResource are on target, or whether other analysts are right with their higher corn projections, may not make much difference in futures prices a week after Friday's Prospective Plantings and Grain Stocks reports.
 
Six times since 1983, USDA's prospective planting figure for corn came in lower than the low end of trade estimates, said Tierney. However, when he looked at the change in December corn futures a week after USDA issued those reports, he found "nearly no relationship" of prices to planting projections.
 

Futures Respond to Stocks

However, he added that July corn futures do seem to respond to surprises in the March corn stocks numbers, which also will be released Friday.
 
Tierney expects the stocks report to show 6.33 billion bushels of corn supplies as of March 1, which is higher than average trade estimates of around 6.16 billion bushels.
 
If the AgResource number is right, July corn futures likely will fall 3 percent or 4 percent in a week, he said. And if that happens, the lower prices may not last long.
 
"There is suspicion that if you push prices down after the stocks report comes out, someone may be inspired to come in and start covering corn needs," he said. Among the potential buyers are China, South Korea, and U.S. livestock producers.
 
"So, we could see a 3 percent to 4 percent decline in the market, but self correction with a surge in demand, possibly from China," he said.
 

Soybeans Taking the Lead

While analysts have been raising projections for corn acreage, soybean futures have taken the lead in crop markets because of declining estimates of South American soybean production.
 
"Expect soybeans to be the main driver in the next three to six months because the South American crop is getting smaller," said Tierney.
 
This month, USDA's projections of South American soybean production were down 10.8% from December projections. Tierney noted that in 2009, USDA had reduced its initial South American crop estimates by 10.2%, and eventually reported a 20 percent decline from the December projection.
 
Tierney expects the smaller South American crop to eventually shift some export demand from South America to the United States, which will draw down U.S. stocks and boost prices.
 

Watch the Weather

USDA uses a national corn trend yield of 164 bu., based on yields from 1990 to 2010, omitting the 2011 yield as exceptionally low.
 
"But if you go back and estimate from 1970 to 2011, you end up with a lower yield," said Tierney. "If you put more years in the data set, you get a lower yield than with the number of years USDA selected."
 
When USDA issues its first official supply projection of the season in its May agricultural supply and demand estimates, it may adjust yield prospects based on planting progress, as it has in many recent years.
 
Based on this year’s weather developments, the May supply-demand report may show a corn yield of 166 or 167 bu./acre, said Tierney.
 
"Most people in the trade will take that as gospel," he said. "But the planting date, while it has an impact on yield … the most important thing we have to be concerned about is weather."
 
As of now, weather presents no significant threat to Midwestern corn and soybean crops, he said.
 
"If we have a third year of 5 percent or more below trend, I don’t' wan to guess" about potential corn prices, said Tierney. "If the yield comes in low, the corn market could explode."

 

 


 
See more pre-report coverage of the March 30 USDA reports and don’t forget to tune in Friday at 7:30 a.m. CST to see full reports and analysis.
 
Have questions for our analysts about Friday’s report? Let us know and we'll get them answered on AgWeb Radio!

 

Related Pre-Report Coverage of the March 30 USDA Reports:

 


 

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Anonymous
3/29/2012 04:21 PM
 

   dont tell me about the corn market exploding, last summer some people said we could have 10.00 corn, its barley half of that now, where did them people go to now, we could have 100 bushel trend line yield, and we might have 7.00 corn

 
 
Anonymous
3/29/2012 04:28 PM
 

   dont brag about the corn market exploding, if we have 100 bushel trend line yield we might have 7.00 corn. last year some said we could have 10.00 corn it barley half of that now, where did those people go, tomorrow morning if it says were going to plant 95 million acres, with in a few days we will have 4.50 corn..

 
 
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