Is the corn party over?

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The USDA’s June 28 Planted Acreage Report was not a hit with many farmers, many of whom would liked to have seen USDA resurvey corn acreage, rather than the soybean acres promised by USDA. The planted corn acreage projection points to a greater abundance of corn than is needed, and an abundance that has the potential to drive prices down further than had been expected.

USDA’s planted acreage projection was for 97.379 mil. acres of corn, compared to the 97.282 mil. in the March Planting Intentions report and 95.313 mil. acres which the market expected.  In fact, the USDA estimate was higher than the highest number offered by the trading industry. The projected harvested acreage was 89.135 mil. which is down from the March report, possibly indicating USDA’s acknowledgement of some abandonment due to flooding, as well as failed acres turned in as a prevented planting crop insurance claim.

USDA’s planted acreage projection was for 77.728 mil. acres for soybeans, compared to the 77.126 mil. acres projected by the March Planting Intentions report and the 78.024 mil. acres estimate offered by the grain market traders. However, the USDA resurvey could change that.  No estimates have been offered for soybean prevented planting.

Cornbelt farmers trimmed back their intended corn planting slightly, but the states where most of that occurred have had large filings of prevented planting claims.  Cornbelt states have slightly increased soybean acreage, but the USDA resurvey will verify that.  Listen to my interview  with Bill Tierney of AgResource, Inc. about the acreage report, who does not think planted corn acreage will be reduced by USDA, however, harvested acreage may decline. He says that will be identified in the August 1 Crop Report. He comments on:

  • Expected production of 14 bil. bu. will be more than current anticipated demand.
  • Carryout will grow over the next two years because ethanol use is topping out.
  • The 2014 crop will likely be priced in the mid-$3 level during its marketing year.
  • While China will be a strong importer, the US has more export competition.

Cornbelt State

Corn Acres

Soybean Acres

 

March

Intentions

June

Plantings

March

Intentions

June

Plantings

Illinois

12,200,000

12,200,000

9,400,000

9,400,000

Indiana

6,100,000

6,100,000

5,100,000

5,250,000

Iowa

14,200,000

14,000,000

9,400,000

9,500,000

Kansas

4,600,000

4,500,000

3,900,000

3,950,000

Michigan

2,600,000

2,800,000

2,100,000

1,900,000

Minnesota

9,000,000

8,700,000

6,800,000

6,800,000

Missouri

3,400,000

3,450,000

5,300,000

5,700,000

Nebraska

9,900,000

10,200,000

4,700,000

4,800,000

N.  Dakota

4,100,000

3,900,000

4,900,000

4,400,000

Ohio

3,950,000

3,950,000

4,650,000

4,550,000

S.  Dakota

5,900,000

5,900,000

4,600,000

4,800,000

Wisconsin

4,350,000

4,200,000

1,700,000

1,680,000

Total

80,300,000

79,900,000

62,550,000

62,730,000

USDA’s Quarterly Grain Stocks were below market expectations for corn, soybeans, and wheat by marginal amounts.  The bullish numbers were overshadowed by acreage:

  • June 1 corn stocks were 2.764 bil. versus trade expectations of 2.845 bil.
  • June 1 soybean stocks were 435 mil. bu. versus trade views averaging 441 mil. bu.
  • June 1 wheat stocks were 718 mil. bu. versus trade estimates averaging 750 mil. bu.

USDA’s Quarterly Grain Stocks Report indicated substantial quantities of corn and soybeans still remain both on farm and in commercial facilities in the Cornbelt. While farm storage is estimated by calls to a sample of farmers, all commercial storage is surveyed. Listen to my interview with Dale Durchholz of Agrivisor Services about the report. He says:

  • More wheat feeding in the past than realized and may be the trend in the future.
  • Old corn prices may be more stable due to wheat picking up livestock feed pressure.
  • Cash premiums for old crop corn can evaporate very quickly.
  • High old crop premiums for soybeans will end fast and ugly. 

Cornbelt State

Bushels of Stored Corn

Bushels of Stored Soybeans

 

On Farm

Elevators

On Farm

Elevators

Illinois

115,000,000

276,094,000

21,000,000

32,651,000

Indiana

63,000,000

96,815,000

13,000,000

18,973,000

Iowa

285,000,000

280,390,000

40,000,000

63,421,000

Kansas

16,000,000

70,570,000

3,300,000

8,664,000

Michigan

34,000,000

39,171,000

62,000,000

5,876,000

Minnesota

245,000,000

147,762,000

18,000,000

24,028,000

Missouri

24,000,000

27,372,000

7,000,000

10,605,000

Nebraska

130,000,000

170,310,000

7,400,000

21,580,000

N.  Dakota

36,000,000

34,197,000

7,600,000

5,858,000

Ohio

61,000,000

68,600,000

16,000,000

17,994,000

S.  Dakota

89,000,000

62,643,000

13,500,000

10,239,000

Wisconsin

67,000,000

69,168,000

5,100,000

8,831,000

Total

1,165,000,000

1,343,092,000

213,900,000

228,720,000

Manage your crop revenue risk, and hope for a surprise increase in demand. That is the bottom line suggested by Illinois ag economists Darrel Good and Scott Irwin who point to some concerning demand factors that have contributed to lower corn consumption:
  • Consumption of corn peaked in 2009/10 and production peaked the same year.
  • Corn prices averaged $3.50 in 2009/10, $5 in 2010/11, $6 in 2011/12, $7 in 2012/13.
  • Corn used for ethanol production peaked in 2010/11 & 2011/12, and dropped this year.
  • Feed and residual use of corn has declined steadily since 2005/06.
  • Grain consuming animal units has remained steady 90-95 mil. since 2004/05.
  • Corn exports peaked in 2007/08 at 2.5 bil. bu., and declined to 1.5 bil in 2012/13.
  • Foreign corn production and exports have increased steadily since 2004/05.

The Good and Irwin projections say, “If the size of the US corn market has peaked, a period of lower prices and reduced acreage may be required. Lower prices would benefit the livestock industry, at least initially. Lower crop farm incomes might result in some downward pressure on farm land prices, particularly if interest rates continue to increase.”

Summary:

Increased demand for corn in 2007 saw a significant increase in market prices, and the more corn that was produced in the US the higher the price and the greater the demand. That trend may have changed. Demand has fallen off from lower exports, ethanol use, and livestock feed demand has been steady at best. How that will affect prices in the next few years, could have a significant impact on cash rents, land values, and overall farm profitability.

Source: FarmGate blog


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