USDA releases 2021
Corn and soybean prices hit limit after report was released
By KRISS NELSON
The annual prospective planting report along with the March 1 grain stocks report was released last week – a report Todd Hultman, DTN lead analyst says always comes with an uneasy feeling.
“I often get a little bit of a tight stomach at every USDA report, but ahead of this one, it’s a little bit more in overdrive,” he said. “I make no bones about my lack of confidence in the prospective plantings acre estimates. That is true every year.”
Last year’s prospective planting report ended up being 6 million acres too high from the final result.
“It’s a little bit to me, about taking a poll a month before the national election. There can be a lot of things that change in that last month when people come down to doing something versus asking them what their intentions are. We can get a big change,” he said.
Regardless if the prospective planting report is something to trust or not, the markets paid a lot of attention to the numbers.
The very bullish report sent both corn and soybean contracts, Hultman said, limit up, which was 25 cents higher for corn and 70 cents higher in beans.
“We are seeing that both in old crop and new crop contracts,” he said. “That gives you a little taste on how the trade is responding to this report.”
Prospective planting estimates for corn, Hultman said came in at 91.1 million acres.
“That’s low. The lowest estimate from analysts on the Dow Jones survey, most were expecting around 93.1 and we did hear of even higher numbers than that, so this is a very bullish number for corn today,” he said.
In a state by state breakdown of the top eight corn producing states in 2020 shows Iowa and Illinois both expecting about 400,000 less acres of corn this year. Nebraska is coming in roughly 300,000 less along with Kansas.
Minnesota is unchanged this year with Indiana 200,000 acres less than last year.
Hultman said there is a big jump of over 600,000 acres of an increase, however in South Dakota.
“Keep in mind, South Dakota and North Dakota both had sizeable prevented acres last year,” said Hultman. “North Dakota had three million prevented last year. South Dakota was 1.7 million. Part of that 1.7 million is coming back into production here. USDA is saying a little over 600,000 of that will be going into corn for South Dakota.
Prospective planting intentions for soybeans is 87.6 million acres, which Hultman said is below the 90 million acres the trade was expecting.
“It is also lower than the lowest estimate in the Dow Jones survey and quite frankly, it is not enough to replenish our soybean supplies at their current tight levels this year,” he said.
For a state breakdown of potential soybean acres in the top eight producing states, Hultman said the decreases that showed for Iowa and Illinois in corn acres, are showing an increase on the soybean side in those two states. There is also a 400,000 acre increase for soybeans in Minnesota.
North Dakota has the largest of the prospected soybean acres of 1.2 million acres. South Dakota, along with their increase on corn acres is expecting to see an increase in soybean acres as well.
“Overall, we see a slight shift from corn acres to bean acres throughout the Midwest and then you add in the two preventive totals from North Dakota and South Dakota and you pick up some acres there,” said Hultman.
There still seems to be more acres available.
“The three crop total for corn, soybeans and wheat is well shy of what we’ve seen in recent years as far as record planting,” said Hultman. “I think there is still room on the upside for these planting estimates to get bigger by the end of June. Of course, we will have to have cooperative weather to see how that goes.”
March 1 grain stocks report
“Here is another bullish figure, 7.7 billion bushels of corn stocks were on hand on March 1,” said Hultman. “That is down significantly from a year ago. It is lower than expected and it is also the lowest in seven years.”
The corn basis, Hultman said has been the biggest clue that corn stocks were tighter than expected. The night before the March 31 report, he said the DTN National Corn Index closed just 10 cents under the board.
“That is a very tight scenario for cash prices we don’t normally see,” he said. “That was probably our best indication that corn stocks are leaner than what was expected and has been a very good sign of demand.”
One concern Hultman has with those corn numbers is even though we have had a lot of corn sales, shipments were rather slow to start this year.
“I was a little concerned that maybe a lot of the corn wasn’t going to be shown it was moved out in the first half, but that was not the case,” he said.
How does corn demand look?
“The nice thing about getting the March 1 corn stocks is we can see how well corn demand is doing in the first half of the 2020-2021 season,” he said. “So far, it is setting a record pace of 8.43 billion bushels of corn used up in the first half of the season. That’s a new record by a slim margin over the 2016-2017 season.”
Demand remains strong despite ethanol production continues to drag due to the coronavirus pandemic in addition to lower hog inventories this year.
“We have to give credit to export sales this year,” said Hultman.
Soybean stocks came in as expected at 1.56 billion bushels (bb) of soybeans on hand.
“That is still a very tight path we are on here heading into summer,” said Hultman. “We are down significantly from the 2.25 billion bushels a year ago. This was the lowest March 1 total we’ve seen in five years. We continue to be on a very tight glide path heading to summer and still suggesting ending stocks of less than 120 million bushels as we get to the end of August.”
On the soybean demand side, Hultman said we continue breaking all records. 3.13 bb of soybeans have been used up in the first half of the current season. This is due in part of a very active crush pace as well as China’s import activity.
“Of course, China’s just amazing amount of purchases for import this year. They are just far larger than anyone expected,” he said. “That continues to be reflected here and has us on a new demand pace for soybeans.”
Hultman reiterated his concern for the lack of confidence of the planting intentions report.
“It is an interesting poll, but there’s still possibility for a surprise by the time we get to the acreage report at the end of June,” he said. “But, for today, I think there is no doubt this is very bullish news for corn and soybeans both.”
In the case of corn, the bullish theme comes from both the lower planting intentions and the lower than expected stocks estimate.
For soybeans, the low planting intentions are extremely bullish, Hultman said.
“It is just not enough to maintain supplies into the new season,” he said. “The market needs to buy some more acres there or do whatever it takes to convince the putting of more acres into production. Soybeans are definitely going to be needed in the new season.”
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