USDA's Prospective Plantings and March 1 Grain Stocks reports held a few surprises, but market action was a bit subdued on corn and soybeans, while new-crop wheat reacted to the lowest planting intentions since those were first recorded in 1919.
Despite what, on the surface, should have been a bearish corn planting estimate, it is likely that the sharp curtailment in ethanol usage due to COVID-19 and the potential for a larger shift in acres from soybeans to corn had not yet figured into the survey from early March. It is possible that March market action and ethanol developments could ultimately shift back a large amount of acreage from corn to soybeans, with some estimates as high as 1 million acres.
NASS' March seeding intentions estimate of nearly 97 ma was 2.7 ma above the Dow Jones trade estimate prior to the report. The 97-ma figure is roughly 7 ma above final planting a year ago. Some notable increases were Michigan (25%), Indiana (16%), Illinois and Minnesota (each up 8%) and Iowa (4%). As the planting intentions survey took place in early March, traders have reservations about how accurate it is. During the month of March, the sharp plunge in crude oil, gasoline and ethanol prices, along with cutbacks and closures at many ethanol plants due to social distancing, makes the estimate suspect. It is very likely that planting intentions could ultimately shift more corn acres to soybeans.
The Prospective Plantings report was bearish for new-crop corn futures, but the futures response was modest.
In the quarterly Grains Stocks report, March 1 stocks fell by a larger-than-expected amount to 7.953 billion bushels (bb). That's about 200 million bushels (mb) below the average trade estimate and down 8% from last year's 8.613 bb. The implied higher feed usage is likely to be more than offset by the decline in corn used for ethanol, which some analysts see reaching 300 mb or more. Of the total, on-farm stocks were pegged at 4.45 bb -- down 13%, with off-farm stocks, at 3.5 bb, up just slightly from a year ago.
USDA's March planting intentions for soybeans, at 83.5 ma, were less than Dow Jones' pre-report estimate of 84.7 ma. The number is up roughly 10% from the 76.1 ma planted in 2019. As ethanol production is likely to slow with plants cutting back production or closing completely, the soybean acreage is likely to move higher in coming months.
March 1 stocks of soybeans are reported to be a slightly larger-than-expected 2.253 bb, compared to the average trade estimate of 2.237 bb, and is down 17% from the 2.727 bb last year. On-farm soybean stocks of 1.01 bb are down 20% from a year ago, with off-farm stocks of 1.24 bb down 15% from 2019.
Tuesday's wheat planting report featured the lowest all-wheat plantings since 1919 at 44.7 ma. That is lower than last year's record of 45.2 ma. Kansas City new-crop wheat futures closed higher Tuesday, as winter wheat seeding, at 30.8 ma, is down nearly 400,000 acres from 2019. Spring wheat planting intentions, at 12.6 ma, were down 1%, with hard red spring at 11.9 ma. Durum planting is expected to decline by 4% to just 1.29 ma. Hard red winter was 21.7 ma, soft red winter was 5.69 ma and white winter was at 3.42 ma.
March 1 wheat stocks of 1.412 bb were 25 mb under the average trade estimate, but down 11% from the 1.593 bb in 2019. On-farm stocks figured down 8%, at 339 mb, with off-farm stocks of 1.07 bb down 12% versus a year ago.
The stocks report was largely neutral to the market.
The 2020 USDA Prospective Plantings and March 1 Grain Stocks reports had little impact on the futures markets following their release. Perhaps the most surprising features were the higher-than-expected corn planting intentions and the lowest-ever all-wheat planting intentions. Other than a modest rally in Kansas City new-crop futures and a decline in new-crop corn futures, the markets are right back to trading fundamentals and outside macro influences.
The uncertainty of the extent of bearish demand influences from COVID-19 and the potential for more flooding issues this spring will continue to keep the jury out on ultimate planting decisions.
Dana Mantini can be reached at firstname.lastname@example.org
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