USDA Reports Review

USDA's end-of-March Grain Stocks and Prospective Plantings reports have a history of springing surprises on markets and that tradition played out in a modest way again Thursday. USDA estimated corn plantings at 88.0 million acres (ma) and soybean plantings at 89.0 ma, both less than expected and the first time since 1983's Payment-in-Kind (PIK) program that soybean acres may outnumber corn.

While younger readers consult Google for an explanation of PIK, I'll go ahead and point out that USDA's lower row-crop planting estimates for 2018 came from three sources:

1: A 1.6 ma increase in U.S. spring wheat acres that brought the spring wheat total to 12.6 million and the all-wheat total to 47.3 million. USDA estimated spring wheat acres will be up 38% in Minnesota and up 20% in North Dakota.

2: A 900,000-acre increase in the estimate of U.S. cotton acres, to 13.5 million. Significant increases are expected in Texas, Georgia, Missouri, North Carolina, Oklahoma, Arkansas, Alabama and even Kansas.

3: A 1.1 ma reduction in the four-crop total of 237.8 ma in 2018. That decision could change later, depending largely on this year's weather. For now, the modest reduction is a reasonable acknowledgment that prevented acres in 2017 were on the low side.

While USDA's planting estimates triggered a celebration of unexpected buying in row crops Thursday, the market chose to ignore a more bearish picture from USDA's Grain Stocks report. USDA said Mar. 1 corn stocks totaled a new record high 8.888 billion bushels (bb), which was more than expected. This means corn usage totaled 8.06 bb in the first half of 2018-19, 262 million bushels (mb) less than a year ago.

Soybean stocks totaled a new record high of 2.107 bb, also more than expected and a reminder of this season's slow export pace. Soybean use in the first half of 2017-18 totaled 2.61 bb, down 165 mb from a year ago.

USDA said all-wheat stocks totaled 1.494 bb, which was roughly as expected. Wheat use through three quarters totaled 1.58 bb and was near its lowest show of demand in eight years. On one hand, this is another bearish factor for wheat prices. On the other hand, the wheat market has encountered bearish news for so long, and spot prices are already so cheap, that the bearish impact of reports like this one has lessened.

As this is being written, corn and soybean prices are both showing double-digit gains. Of course, this is still March and the bulk of planting has yet to begin. This spring's cold start in the Corn Belt and wet conditions (especially in the southeastern Midwest) mean fieldwork for many is still several weeks away.

I also have to mention that USDA's planting estimates, like all forms of prediction, are not infallible. USDA cites 90% confidence intervals of plus or minus 2.4%, 3.5%, 9.6% and 11.0% for corn, soybeans, spring wheat and cotton, respectively. In other words, it is still early -- buyer beware.

Todd Hultman can be reached at Todd.Hultman@dtn.com

(BE/CZ)

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