Crop outlook under three weather scenarios

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Now that we have a little more information about 2012 crop acreage, we look at possible outcomes with poor, average or excellent weather/yields. The analysis suggests that we may get a big increase in corn carryover stocks if yields are near trend and farmers plant as much as they say they will. However, even with higher acreage and average or better yields, soybean ending stocks get very tight in 2012/13. Demand is expected to increase by about 10 percent next season. U.S. wheat stocks hold about steady with average yields, but wheat prices could fall to $5 or less in 2012/13.

click image to zoom CORN: Ending stocks rise, even with poor weather. Using USDA’s Prospective Plantings figure of 95.9 million acres to be planted and average weather and yield, we’d get a record supply just over 15 billion bushels. You’ll notice 2012/13 beginning stocks are about 95 million bushels. lower than USDA’s ending stocks figure for 2011/12. We think feed & residual usage will turn out larger than USDA’s current forecast. Under the “normal” weather scenario, we’d see ending stocks more than double and knock $1.45 per bushel off this year’s estimated farm price. Even under the “Poor” weather scenario, we still see production exceeding the 2011 level year due to the big hike in acreage.

click image to zoom SOYBEANS: Even with excellent weather, ending stocks tighten. We think soybean acreage will prove to be about 600,000 acres higher than last Friday’s Prospective Plantings report indicated. New crop soybean futures have been busy “buying acres” from other crops since USDA took its survey. Notice also we lead off the new-crop balance sheets with a lower beginning stocks figure than USDA is currently projecting for old crop ending stocks. We think USDA is 15 million bushels too low on likely crush this year; 30 million bushels too low on likely exports. We also see soybean acres rising by more than a million acres from “intentions” under the “Excellent” weather scenario, due to a variety of factors (more double-cropping, for example). And even though we trim estimated usage under the “Poor” weather scenario by 185 million bushels. Due to price rationing, the math still works out to only a 13-day supply in ending stocks and a $15 per bushel average farm price! The demand outlook is so strong, that even under the “Excellent” weather scenario, the average farm price is higher than this year’s!

click image to zoom WHEAT: It will take poor weather to trim ending stocks. We think spring wheat acreage will prove to be about 330,000 acres higher than indicated in the Prospective Plantings report. The shift is expected in the northern Plains, especially North Dakota. The planting intensions showed farmers boosting corn acreage by a whopping 59 percent, over a million acres above last year. But since that poll was taken, corn futures have slipped, nitrogen prices have increased, and spring wheat futures have strengthened. Poor soil moisture is a factor and spring wheat will do better than corn under low moisture conditions. The March 1 wheat stocks data was a little over 20 million bushels. below expectations, indicating more 3rd quarter wheat feeding than reflected in USDA’s current balance sheet. However, poor weather will only keep us from adding further to ending stocks and a lower average farm price for 2012-crop.

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