On Friday, March 29, at 11 a.m. CDT, USDA will release its quarterly Grain Stocks and annual Prospective Plantings reports. These reports at the end of March are known for their surprises and their ability to move prices. Unfortunately for U.S. producers, most of the numbers are likely to look bearish.
Fresh after a Washington, D.C., snowstorm in late February, USDA estimated U.S. farmers would plant 92.0 million acres (ma) of corn this spring, up from 89.1 ma last year. One short month later, estimating corn plantings has become much more complicated due to severe flooding in the Western Corn Belt and a spring outlook that the National Oceanic and Atmospheric Administration (NOAA) says has the "potential for major or moderate flooding in 25 states." (https://www.noaa.gov/…)
It is also helpful to know that flooding began March 6 and escalated quickly at the same time USDA was conducting its survey of producers, on which Friday's planting estimates are based. Every year has its challenges making planting estimates, but 2019 is already facing more than its usual share.
Dow Jones' survey of analysts expects USDA to estimate 91.2 ma of corn, up 2% from last year's 89.1 ma. The push for more corn acres is not necessarily due to corn's profitability, but has more to do with concerns about how low soybean prices might drop this fall under the weight of record ending soybean stocks, and especially if China keeps its 25% tariff on U.S. soybeans.
USDA's report of March 1 corn stocks will serve two purposes Friday. First, it will tell us how corn demand did in the first half of 2018-19. On that point, Dow Jones' survey of analysts expects 8.336 billion bushels (bb) of U.S. corn in storage on March 1. If true, that will be the smallest March pile in three years and could be the second-best demand ever seen for the first half of the season.
The second purpose of Friday's March 1 stocks estimates will be to give us a before-the-flood picture of grain supplies. The flooding that occurred shortly after March 1 damaged stored grain. That may not affect large amounts in terms of total U.S. supplies, but it's regionally significant and will account for some boost in disappearance in the third quarter. USDA's report of June 1 grain stocks on June 28 will give us the after picture for comparison.
Just as USDA's February estimate of corn plantings is expected to be adjusted lower Friday, analysts in Dow Jones' survey expect USDA to increase its soybean planting estimate higher, from 85.0 ma in February to 86.2 ma on Friday. The thought is that acres not planted early enough for corn will go to soybeans. However, this year, when much of the Midwest is contending with saturated soil moisture and is prone to more flooding, there will likely be more prevented plantings. That means the decrease in corn acres may not necessarily translate one-for-one to soybeans.
In terms of March 1 U.S. soybean stocks, Dow Jones' survey is looking for a record-high 2.719 bb. USDA will have its own variation, but a new record high is virtually certain as China's tariff has resulted in a dramatic increase in U.S. soybean supplies in 2018-19. If the survey is correct, first-half demand of 2.28 bb will be the lowest for U.S. soybeans in six years. Because of the current tariff situation, it is difficult to imagine any bullish slant in Friday's report for soybeans.
In terms of winter wheat planting, USDA already gave us a 31.3 ma estimate in February, which was down 4% from the previous year. Dow Jones' survey expects all U.S. wheat acres at 46.9 million in 2019. If true, that would be the second lowest on record, just above the record low of 46.0 ma in 2017. Spring wheat plantings are expected at 13.37 ma, up slightly from 13.20 ma a year ago. Spring wheat planting may also be a challenge in 2019 with snow and flooding in the Dakotas likely pushing planting dates forward.
For U.S. wheat stocks, Dow Jones' analysts expect USDA to find 1.543 bb still in storage on March 1, up from 1.495 bb a year ago, but not as much as the 1.659 bb counted in 2016-17. If true, three-quarters of demand in 2018-19 will have totaled 1.58 bb. That would be the third-worst demand total of the past 12 years as U.S. wheat producers continue to fall short against a competitive world environment for wheat.
While USDA's Prospective Plantings survey has its flaws, there is no denying that these twin reports at the end of March have had substantial price impacts -- especially on corn. Four times in the past five years, December corn has ended the end-of-March-report day with double-digit moves -- twice up and twice down.
Past moves in November soybeans have not been as dramatic, but they did post a 31 1/4-cent gain last year after USDA's planting estimate came in 1.9 ma lower than expected at 89.0 ma. The lesson here is that USDA's reports at the end of March can hold surprises, and we will be watching for any that might pop up on Friday.
Join us Friday at noon CDT for DTN's post-report webinar where I will review USDA's numbers and what they mean for grain prices. Sign up for Friday's webinar at: https://dtn.webex.com/…
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Todd Hultman can be reached at email@example.com
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