USDA's estimate that 93.6 million acres of corn will be planted in 2016 caught most by surprise on Thursday and was over 2 million acres above the highest guess in Dow Jones newswire's pre-report survey. Finding the number too big to believe, I dug deeper and found some helpful insights.
First, it should be noted that total acres for corn, soybeans and wheat were estimated at 225.4 million, virtually the same as 2015. The 5.6-million-acre increase in corn was made possible by a 5-million-acre reduction in wheat and a half-million-acre reduction in soybeans. Theoretically, there is room for corn's increase, but is it correct to believe that all wheat acres will go to corn, especially as we have heard about the increased profitability of pulses like lentils and chickpeas?
Going down USDA's state-by-state list of planting estimates, we see that the numbers for Illinois and Iowa were increased by 400,000 acres each. South Dakota and Nebraska were increased by 300,000 acres each and Indiana by 150,000 acres. Increased plantings in those high-yield states are definitely bearish.
I also can't find fault with a 300,000-acre increase in the estimate for Missouri after their flooding problems of 2015. However, a 330,000-acre increase in the estimate for Louisiana is hard to believe in the face of this spring's flooding. I also have to wonder about the top two increases on USDA's state list: 650,000-acre gains for both Kansas and North Dakota.
In 2015, North Dakota's corn yield averaged 128 bushels an acre while Kansas came in at 148 bushels. Both of these states on the outer fringe of the Corn Belt yielded less than the national average of 168.4 bushels an acre, and it is fair to wonder about their potential in 2016. The latest U.S. Drought Monitor shows both states currently considered abnormally dry with a patch of moderate drought conditions in southwestern Kansas.
Overall, USDA's corn planting estimate is plausible, but only as long as we understand that not all the new acres are necessarily high-yielding ground. The most bearish aspect of Thursday's report is that it has been branded in our minds and will dominate the numbers we talk about until more is known about the new crop. For corn growers hoping for a better price in 2016, USDA's June 30 report and summer weather can't get here soon enough.
Todd Hultman can be reached at email@example.com
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