Last Friday, March 30, the United States Department of Agriculture released a slew of highly anticipated reports, including its 2012 Prospective Plantings and Grain Stocks data.
Coming into the report release, grain and oilseed markets seemed to be losing bullish momentum, but the data re-invigorated buying interest, with strong gains for grain and oilseed markets Friday.
The question is: can a renewed turn higher in grain be sustained going into the spring seeding season? Let's look at the report first.
USDA forecast 2012 American corn acres came in higher than expected, though old crop quarterly stocks are lower than initial trade ideas. U.S. soybean acres for 2012 are at only 73.9 million though, well below trade expectations and served as the key bullish feature of this report.
However, since this report survey was taken near the beginning of March, I suspect that with the big rally in the soybean market relative to corn over the past six weeks or more, we probably have already seen some shift in grower seeding intentions back to beans. So I expect this soybean acreage number to rise in subsequent reports.
Even the wheat numbers came in more market positive than expected. U.S. total wheat acres for 2012, pegged at 55.9 million, came in well below trade expectations and are only a tick higher than 2011. The difference maker here is the much lower than expected U.S. spring wheat acreage estimate.
The following table summarizes the USDA's prospective plantings and quarterly grain stocks reports. Estimates are in millions of acres for 2012 US prospective plantings and billions of bushels for grain stocks as of March 1.
Link to prospective plantings and grain stocks charts
American farmers, driven by the prospect of strong crop prices, will be planting nearly 96 million acres of corn this year, topping market expectations and increasing acreage by four per cent over last year. A shift over to corn and away from soybeans is behind much of the increase as farmers try to predict where the best returns will come from. The new forecast calls for the largest U.S. corn acreage base since 1937.
The supportive feature for the corn market in this report, though, came from old crop stocks estimate. The USDA reported stockpiles from the last year's corn crop lower than expected. U.S. corn stocks, stored either on- or off-farm, total 6.01 billion bushels, an eight per cent decrease from about this time a year ago.
Old crop U.S. corn futures rallied on the tightening old crop stocks situation. In the aftermath of this report, traders are so far focusing more on the old crop tight stocks figure, as larger new crop plantings generally were already expected.
U.S. soybean acreage for 2012 is expected to decline to about 74 million acres, a one per cent drop from last year and five per cent less than 2010. The level of soybean planting either remained the same or dropped off from last year throughout the American corn belt and Great Plains.
"Compared with last year, planted acreage intentions are down in many areas as some acreage is expected to shift to corn," the USDA said. "Additionally, soybean acreage intentions in Kansas, Oklahoma and Texas are down from 2011 due to drought conditions that have continued from last year into early March."
But as mentioned above, I suspect that with the big rally in the soybean market, we probably have already seen some shift in grower seeding intentions back to beans since this report survey was taken. So, as stated earlier, I look for this soybean acreage number to rise in subsequent reports.
Regardless, bullish for bean futures near-term as it raises the stakes for a U.S. crop that needs to build inventories, particularly after South American production this winter did not live up to early expectations. Private estimates out of South America seem to show production in both Argentina and Brazil declining daily, while Chinese demand for oilseeds continues unabated.
U.S. wheat numbers came in more market positive than expected. Total American wheat acres for 2012, pegged at only 55.9 million, came in well below trade expectations and are only a tick higher than 2011. The difference maker here is the much lower than expected U.S. spring wheat acreage estimate, with a loss to corn acres talked about as planting season gets an early start.
USDA projects only 12.0 million acres of spring wheat, far below the average analyst estimate of 13.4 million and below what any projected. Traders assumed U.S. spring wheat acreage would rebound from 2011's 12.4 million, as farmers reclaimed North Dakota fields that were flooded last year. The lower acreage number is particularly supportive for Minneapolis spring wheat futures.
Mike Jubinville of Pro Farmer Canada offers information on commodity markets and marketing strategies. Call 204-654-4290 or visit www.pfcanada.com to find out more about his services.