USDA Reports Preview

Drumroll Begins for USDA Planting Estimates

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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USDA will release its Acreage and quarterly Grain Stocks reports at 11 a.m. CDT Friday. (Logo courtesy of USDA)

Typically, corn is shoulder high by now and soybeans are well on their way to canopying, but if there is one word we can't use in 2019, it is "typically." The first clue came in May when we were comparing the slow pace of corn planting to 2013. Then, in late May, we were comparing the planting pace to 1993 and 1995.

Sometime in early June, it became obvious that comparing to previous years was futile as we had never seen so much rain cover so much of the Corn Belt for such an extended time during planting season. In 2019, we stand on a path untraveled, and it has made the process of estimating row-crop acres more difficult than usual.

It is important to understand that Friday's acreage estimates from USDA begin with surveys conducted in the first two weeks of June. This year, farmers were still struggling with planting in early June, looking for a day here or there when conditions were dry enough to get in the field, even if just for a few hours before the next showers fell.

The other tricky factor hiding in USDA's numbers that many seem to forget is that the three-crop total of corn, soybeans and wheat in USDA's acreage estimate in June is 220.2 million acres (ma), down 5.9 ma from last year. In other words, USDA has already factored in a smaller planting area in addition to the 3 ma reduction seen in June's planting estimate.

Given this year's difficult weather and late planting, USDA's June 28 estimates will not be as accurate as other years and will need to be updated on Aug. 12. Some may be tempted to dismiss Friday's estimates, but that would be a mistake. Even with its flaws, USDA's June effort will be the most credible measurement attempt that the market has available and it will narrow the range of guesses moving forward. In short, Friday's acreage estimates, flawed as they are, could set the tone for corn prices into harvest.

CORN

As we look to Dow Jones' survey of 17 analysts, we see corn plantings estimated in a range from 84.3 ma to 88.8 ma, resulting in an average guess of 87.0 ma. If true, that would potentially take USDA's estimate of U.S. ending corn stocks from the current 1.675 billion bushels (bb) down to a more bullish estimate of roughly 1.3 bb. With the level of uncertainty running high in 2019, it won't take much of a swing in the acreage estimate to have dramatic consequences for corn stocks. That is why Friday's number is so important for prices moving forward.

As potentially bullish as the acreage estimate is, the same cannot be said for June 1 corn stocks. It is clear that export activity for U.S. corn slowed in the third quarter of 2018-19, especially in the final half of May as corn prices moved higher. Dow Jones' survey expects USDA to find 5.308 bb of corn on hand as of June 1, roughly the same as a year ago. If true, that means U.S. corn demand will have totaled 11.26 bb through three quarters of 2018-19, a lower amount for the second consecutive season.

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SOYBEANS

For soybeans, traders have to wonder if fewer corn acres translated to more soybean acres. Or were planting conditions so difficult that even soybeans lost acres in 2019? Monday's Crop Progress report from USDA suggests the latter, saying 85% of soybeans were planted as of June 23, short of the five-year average of 97% for this time of year.

Persistent and relentless rainfall in the eastern Midwest through June also supports the notion that soybean acres were lost. Dow Jones' survey expects USDA to peg soybean plantings at 84.6 ma Friday, the same as forecast in the March Prospective Plantings report and the June WASDE report.

If Dow Jones' survey is close, the U.S. soybean crop will have a chance to fall below 4 bb for the first time since 2015. While prospects for a smaller crop help trim expectations for new-crop ending soybean stocks, we can't yet say it will be bullish for soybean prices because, once again, we can't confidently predict demand without knowing whether China will be a willing participant in 2019-20.

As things currently stand, soybean demand has suffered without China in 2018-19, and Dow Jones' survey expects USDA to find 1.86 bb of soybean stocks in the U.S. on June 1, the most ever for that date. With U.S. soybean shipments down 24% in 2018-19, it is difficult to imagine anything other than a bearish report of soybean stocks Friday.

Once again, trade with China is the key to higher soybean prices, and talks are said to be taking place ahead of this week's G20 meeting in Japan.

WHEAT

For wheat, Friday's USDA reports just don't hold the same drama as they do for corn and soybeans. Any impact on Friday's wheat prices is likely to come from corn. USDA's current wheat planting estimate of 45.8 ma is the lowest in 100 years and is not likely to change much, if at all, on Friday.

June 1 wheat stocks in the U.S. will represent the ending supply of 2018-19 and are expected to land near 1.1 bb, an amount that has been anticipated for months. It is difficult to imagine any surprise for wheat prices in Friday's reports and, unless corn has a surprise, Friday's trading in wheat is apt to be more about weather conditions around the world.

While USDA's Grain Stocks reports are likely to be bearish Friday, there is plenty of room to be stunned by a surprise in USDA's estimates of row-crop plantings. Again, because of this year's difficult field conditions, USDA's planting estimates in June will need to be refined later. But what we do learn Friday is apt to set a direction for prices into harvest.

Join us Friday at noon CDT for DTN's post-report webinar where I will review USDA's estimates and answer questions. Sign up for Friday's webinar at: https://dtn.webex.com/…

QUARTERLY STOCKS (million bushels)
6/1/19 Avg High Low 3/1/19 6/1/18
Corn 5,308 5,497 5,099 8,605 5,305
Soybeans 1,856 1,962 1,700 2,716 1,219
Wheat 1,092 1,113 1,021 1,591 1,099
ACREAGE (million acres) USDA USDA
6/28/19 Average High Low 3/29/19 2018-19
Corn 87.03 88.80 84.30 92.80 89.13
Soybeans 84.59 86.50 83.00 84.60 89.20
Cotton 13.80
All Wheat 45.67 46.10 45.00 45.80 47.80
Winter 31.48 31.70 30.80 31.50 32.54
Spring 12.61 13.00 12.00 12.80 13.20
Durum 1.47 1.80 1.30 1.42 2.07

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

Follow him on Twitter @ToddHultman1

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Todd Hultman