In what is becoming a trend, the USDA reported a shocking corn plantings number for the second year in a row in its quarterly stocks and planted acreage report. On June 30, the USDA revealed a surprisingly small corn plantings number and lower-than-expected quarterly stocks. Just like last year, this sent corn futures to locked limit status, but unlike last year, corn traded higher not lower.
The USDA reported corn plantings in 2010 is estimated at 87.9 million acres, up 2 percent from last year. The largest increases in planted acreage compared to last year are reported in Illinois and Kansas, both up 600,000 acres from 2009. This is the second largest corn plantings on record and up 1.39 million from a year ago.
Other notable increases were shown in Indiana, up 400,000 acres; Missouri, up 300,000 acres; and Ohio, up 250,000 acres. The largest decrease in planted acreage is reported in Iowa, down 400,000 acres, while both Nebraska and South Dakota are down 350,000 acres from the previous year. The USDA will next update yields and projected production levels in July report.
Using the previously reported yields of 163.5 bushels per acre this places 2010 production at 13.24 billion bushels, a record large figure.
This is concerning to the trade as the latest projected demand is at 13.4 bb. Based on a 163 bpa yield estimate for 2010/11, new crop U.S. corn ending stocks now look much closer to 1.1 to 1.2 billion bushels than the USDA’s last estimate of 1.573 billion. Today’s reports likely put the near term low in corn prices and may have put in the low for the year.
Based on the view of 2010/11 ending stocks around 1.1 billion bushels, the new crop stocks/usage ratio would be around 8.5 percent – the lowest since 1995/96.
June 1 corn stocks were estimated at 4.31 bb, 6 percent less than the average trade guess, but 49 million bushels larger than a year ago.
It seems suspicious the USDA decreased quarterly stocks due to increased feed usage in the second quarter of this year at a time when pork and cattle inventories are sharply reduced compared to a year ago levels.
USDA is indicating second quarter 2010 feed usage was record large. The only logical explanation is the poor quality of corn required more corn for feed usage than normal.
The USDA soybean planted area for 2010 is estimated at a record high 78.9 million acres, up 2 percent from last year, 1.42 million acres from a year ago. Area for harvest, at 78.0 million acres, is also up 2 percent from 2009, and will be the largest harvested area on record, if realized.
Compared with last year, planted acreage increased by 300,000 acres or more in Iowa, Kansas, Minnesota and Nebraska. The states with the largest declines compared with last year are Arkansas, down 270,000 acres,; and North Carolina, down 250,000 acres.
Record high planted acreage is estimated in Kansas, Nebraska, New York and Pennsylvania, and planted area will tie the previous record high in Minnesota and Oklahoma.
Using trendline yields of 43.5 bpa, a record crop would be produced of 3.40 bb. Ending stocks could increase to 440 mb.
June 1 soybean stocks were estimated at 571.0 mb, slightly less than the trade expected and 25 mb less than a year ago.
Corn closed the week $.32 higher. Only 8 percent of the crop is rated either poor or very poor. Last year’s ratings were 72 percent g/e and only 7 percent poor-to-very poor. The big question is can ratings hold these levels during the growing season?
Strategy and outlook: Producers should be 100 percent sold in cash/hedges for the 2009 crop. Hedgers have sold a portion of the 2010 crop when December futures traded above $4.50. The next sales objectives for corn producers has been met when corn traded between $3.80 and $4.00. Producers should have bought new crop put option protection at this level.
Soybeans closed the week $.12 1/2 lower from last week. Last week, the USDA reported a 230,000-MT soybean sale to China and a 40,000-MT bean oil sale to China.
While it was up 24 percent from a year ago, marketing year-to-date soybean oil for biodiesel production is now essentially unchanged from last year. The USDA reported crop ratings of 67 percent g/e, down 2 percent from last week. Last year, 68 percent of the crop was rated g/e and 6 percent was rated p/vp.
Strategy and outlook: Producers should be 100 percent sold in cash/hedges in the 2009 crop. Producers have sold 2010 crop when November futures traded above $10.30 and at the $9.87 level.
The next sales objectives for producers was met when November beans traded between $9.45 to $9.62. Producers should have purchased new crop put option protection at this level.
Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Midwest Market Solutions is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien.
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