USDA Reports Preview

By Darin Newsom
DTN Senior Analyst

Heading into yet another March 31 set of USDA reports, I continue to hold the minority view that quarterly stocks should trump prospective plantings.

USDA will release the reports at 11 a.m. CDT Friday.

QUARTERLY STOCKS

As I sit down to write another preview for USDA's March 31 Quarterly Stocks and Prospective Plantings reports, I can't help but be reminded of a Gary Larson Far Side comic from the spring of 1991. It shows a small group of three people in a big room under a large banner emblazoned with "DLDWWS." The caption underneath the cartoon reads: "At the international meeting of the Didn't Like 'Dances with Wolves' Society." I'm reminded of this because I too (yes, I'm a member of that previously mentioned society) belong to another lonely club, Analysts Who Think Quarterly Stocks Trump Prospective Plantings.

It comes down to this: Quarterly stocks are supposedly based on actual data showing how many millions of bushels of grain are still being held in storage. Fairly cut and dried. Stocks were what they were when the calculations were done. Can mistakes be made? Absolutely, but those are more common in September when early new crop might skew the numbers. Here at the midpoint of the marketing year for corn and soybeans (as of March 1) and three-fourths the way through wheat's marketing year, quarterly stocks are a decent read on what demand has been. Has been. Not what is going to be, or could be, or should be. No, quarterly stocks don't make faulty projections, but provide us a good indication of what has happened. And isn't that what's important, after all?

Let's look at what the numbers could be Friday. The average pre-report estimate for corn came in at 8.551 billion bushels. If realized when USDA releases its official numbers, ag media will explode in a cacophony of "largest stocks ever." But, what does such a number say about first-half (FH) demand?

First and foremost, if this 8.551 bb is close to USDA's estimate, it would imply Q2 demand of 3.8 bb and FH demand of 8.4 bb, both record levels of disappearance by a large amount. However, as with everything else, once projections are made about what it might mean for total marketing year demand, the analysis falls into the familiar abyss of unknown variables. But, if 10-year averages hold true for the balance of 2016-2017, total demand for U.S. corn could total 14.6 bb. You'll note this is equal to USDA's current projection of total demand, meaning projected ending stocks of 2.309 bb is also in the ballpark with USDA's March estimate of 2.320 bb.

The average pre-report estimate for soybeans quarterly stocks came in at 1.679 bb, again implying record Q2 demand of 1.2 bb and FH demand of 2.8 bb. If average second-half demand (10-year) comes to pass, total demand could come in at 4.3 bb, putting ending stocks at approximately 185 mb. However, USDA is running closer to the five-year averages, putting total demand near 4.1 bb and ending stocks at 385 mb.

U.S. wheat quarterly stocks showed a pre-report average of 1.622 bb, projecting total demand (using the 10-year average) at 2.220 bb, roughly 50 mb less than USDA estimated in its March reports. This would actually seem logical given the ongoing slower-than-projected pace of exports. Ending stocks would come in just short of 1.2 bb, also about 50 mb more than USDA estimates.

PROSPECTIVE PLANTINGS

And now for the popular club. Everyone will be talking about USDA's prospective planting numbers despite the fact these will be -- have to be -- revised depending on how spring weather plays out. While the excitement around this set of numbers has always eluded me, it is what it is, and these are what the pre-report estimates are.

U.S. farmers are expected to plant 91.0 million acres of corn, down from 2016's 94.0 mb but in line with what prognosticators have been talking about since last fall. Soybean prospective plantings are expected to come in at 88.1 million, as a hashed and rehashed number, and well above last year's 83.4 ma. All-wheat prospective acres were estimated at 46.1 million, down from the previous year's 50.2 ma with the bulk of the drop already known to be in winter wheat.

Keep in mind that this is the second first look at 2017 acres -- the first, first look being a highlight of USDA's annual Outlook Forum in February. The next, or third, first look at expected acres will be in USDA's May Crop Production report. So we have that to look forward to.

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Editor's note: Join DTN Senior Analyst Darin Newsom at 12 p.m. CDT Friday as he analyzes the Quarterly Grain Stocks and Prospective Plantings reports and gives a grain market outlook for the spring quarter. Sign up now at: http://www.dtn.com/…

QUARTERLY STOCKS (million bushels)
	3/1/17	Average	High	Low	12/1/16	3/1/16
Corn		8,551	8,900	8,280	12,384	7,822
Soybeans		1,679	1,800	1,627	2,895	1,531
Wheat		1,622	1,721	1,417	2,073	1,372
Grain Sorghum		195	204	186	311	202
PROSPECTIVE PLANTINGS
ACREAGE (million acres)					USDA
	3/31/17	Average	High	Low	2016-17
Corn		91.0	92.5	89.7	94.0
Soybeans		88.1	90.2	85.9	83.4
All Wheat		46.1	48.2	44.2	50.2
Winter		32.4	33.0	32.0	36.1
Spring		11.3	12.2	9.9	11.6
Durum		2.1	2.5	2.0	2.4
Grain Sorghum		6.0	6.6	5.4	6.7

Darin Newsom can be reached at darin.newsom@dtn.com

Follow Darin Newsom on Twitter @DarinNewsom

(AG/ES)

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