USDA Chief Economist Robert Johansson's early acreage estimates released at USDA's Agricultural Outlook Forum for 2016 reinforce early bearish fundamental outlooks for major row crops.
"Johansson estimated 90 million acres of corn will be planted in 2016, up 2% from 2015, but still down from the peak of 97.3 million acres in 2012," DTN analyst Todd Hultman said. "If the estimate holds up, it will mean that another year of good crop weather could give the U.S. a 14-billion-bushel corn crop on top of nearly two million bushels of carry coming into the 2016-17 season."
In his speech, Johansson noted that corn supplies are projected to reach a record high in 2016.
"Strong competition from South America will likely limit any increase in exports, and as a result, U.S. corn ending stocks are expected to reach a 12-year high at the close of the 2016/17 marketing year, pushing prices lower," Johansson said.
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Johansson said lower-prices forward marketing opportunities and input costs favor corn over soybeans. Even through there were more than 2 million acres of prevent plant soybeans last year, USDA sees acreage declining by 200,000 acres.
"2016 soybean plantings were pegged at 82.5 million acres, down slightly from a year ago, but enough to produce a 3.8-billion-bushel crop, weather permitting," Hultman said. "With big soybean harvests in South America on the way, USDA's numbers remind us of how heavy supplies could get if U.S. weather is favorable again this year."
Johansson said higher beginning stocks will more than offset lower production, leading to record high supplies as prices fall for the fourth straight year.
USDA's wheat acreage forecast, at 51 ma, is the lowest since 1970, Hultman said. It's down 7% from a year ago and below most expectations.
"If true, it would also be the largest percentage drop in plantings since a 9% drop in 2010," Hultman said. "This could be mildly supportive to wheat prices, but with the U.S. already bringing a billion bushels of old wheat into the new 2016-17 season, we are still a long ways from describing anything as bullish for wheat."
Overall, Johansson sees lower commodity prices cutting overall acreage for eight major crops by 2.5 million acres even as CRP area continues to decline. Acreage for those major crops is projected to be down 8.5 million acres from its peak in 2014.
"Lower crop returns will push some area out of production while shifts in relative returns will reallocate planted area among crops. Along with weather, changes in prices and input costs between now and planting time will determine final acreage," Johansson said.
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