USDA outlook pessimistic for grain markets

By Kent Thiesse

Corn market prices took a sharp nosedive based on higher than projected USDA estimates for intended 2019 U.S. corn acreage and current corn stocks. Results for soybeans were mixed, also based on recent reports.

USDA released the Prospective Plantings Report and the Quarterly Grain Stocks Report on March 29. These were highly anticipated reports due to the uncertainty in grain prices in recent months, the potential for adjustments in U.S. crop acreage in 2019, and the current status of likely increasing grain stocks in the coming year.

These late March reports are critical to farm operators and grain traders because they have a high impact on grain market prices in the spring and early summer. During the spring months, many farmers try to sell remaining grain inventories, as well as look for opportunities to forward price a portion of the anticipated crop. Corn and soybean prices usually reach their peak price from April until June. Following are some highlights:

Corn: The Planting Intentions Report indicated an estimated 92.8 million acres of corn to be planted in 2019, an increase of 4 percent from the 89.1 million planted acres in 2018 but below the 94 million acres in 2016.

The USDA corn acreage estimate was about 1.5 million acres above the average grain trade estimate of near 91.3 million acres. The highest U.S. corn acreage recorded in the March USDA estimate was 97.2 million acres in both 2012 and 2013. The 2019 corn acreage is expected to increase in Minnesota, Iowa, and the Dakotas.

Total U.S. corn stocks on March 1 were listed at over 8.6 billion bushels, down from 8.9 billion bushels in 2018. The March 1st USDA estimate was toward the high end of the grain trade estimates, which was bearish on the corn market.

Soybeans: As expected, soybean acres are expected to decline significantly in 2019, based on projections in the Planting Intentions Report. Producers will plant 84.6 million acres, down 5 percent from 89.2 million acres in 2018, and well below the record of 90.1 million acres in 2017. The 2019 estimate for planted soybean acres was about 1.5 million acres lower than the average grain trade estimates. The 2019 soybean acreage is expected to decrease from the previous year by 6 percent in Minnesota, as well as to decline in most other major soybean producing states.

Soybean stocks on March 1 were listed at nearly 2.72 billion bushels, up about 29 percent from 2.1 billion bushels a year prior. The March 1 soybean stocks estimate came in very near the pre-report estimates; however, both the estimated U.S. and world soybean stocks remain at record levels, which continues to put downward pressure on soybean prices.

Wheat: Intended total U.S. wheat plantings for 2019 are 45.8 million acres, down 3 percent from the 2018 wheat acreage of 47.8 million acres. The 2018 U.S. wheat acreage would be the lowest in 100 years, since records began in 1919. Total wheat acreage exceeded 50 million acres as recently as 2016. Spring wheat acreage is expected to decline in Minnesota and the Dakotas, with further acreage declines possible if spring planting is delayed in the Upper Midwest.

Total wheat stocks on March 1 were listed at 1.6 billion bushels, up 6 percent from 1.49 billion bushels a year ago. The 2019 wheat stocks estimate was near the lower end of grain trade estimates.

The March Grain Stocks Report indicated that as of March 1, there were over 5.1 billion bushels of corn and 1.27 billion bushels of soybeans stored on farms in the U.S., which represents about 60 percent of total corn stocks and 47 percent of total soybean stocks. There were 730 million bushels of corn and over 103 million bushels of soybeans in on-farm storage in Minnesota on March 1. USDA does not survey the percentage of the bushels in on-farm storage that are forward priced for future delivery. However, many private analysts feel that a much higher percentage of the corn and soybean bushels still in storage on March 1 may not be forward priced compared to recent years.

On March 29, December corn futures on the Chicago Board of Trade decreased by 13 cents per bushel, closing at $3.84 per bushel. Both the CBOT December corn futures price and local forward contract prices in southern Minnesota are now near the lowest levels thus far in 2019.  Following the USDA Reports on March 29, CBOT soybean futures prices closed mixed, with the November futures price closing at $9.19 per bushel, which also is near the lowest 2019 harvest price opportunities.

Most grain analysts felt the dramatic reaction in the corn market was primarily due to the surprise in the USDA planting intentions and higher grain stock estimates for corn. The USDA Report was based on planting intentions as of March 1; however, the potential for later than normal spring planting dates in western Corn Belt and Upper Midwest states may cause some of the planting intentions to change in the coming weeks. Producers also continue to hope for some resolution to trade negotiations with China and other countries, which could enhance export numbers for U.S. soybeans and other crops, strengthening future grain prices.

For additional information email Kent Thiesse, Farm Management Analyst and Senior Vice President, MinnStar Bank, Lake Crystal at kent.thiesse@minnstarbank.com.  
 
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