Latest USDA report has corn growers on their ears (April 5, 2016)
By John Hall, Commodities Analyst
Two significant USDA reports were released on March 31.
The Prospective Planting Report and the Quarterly stock report.
The Planting Intentions Report is based on a recent survey to growers.
This report does not usually stir the market.
However, this year was the exception in corn.
In 2015, U.S growers grew 87.999 million acres of corn.
This year the trade was estimating an increase to 89.972 million — The Ag Forum in late February estimated 90 million.
The grower survey indicated a whopping 93.601 million acres of corn would be planted — the most acres in history!
In soybeans, growers indicated they would plant 82.236 million acres.
This was slightly less than 82.5 million estimated at the Ag Forum, and the 82.650 million planted last year.
Wheat planting intentions came in at 49.559 million acres, which was down from the 51 million The Ag Forum estimated and the 54.644 million planted last year.
The Quarterly Stocks Report is a measure of how much grain is left after the last three months of usage.
This report has brought surprises and market reaction in past years.
Historical data shows nine out of the last 15 years corn rallies the day of these reports and soybeans go down nine out of the last 15 years on the day of these reports.
Not the case this year. In corn, the trade predicted 7.801 billion bushels remained.
The report had 7.808 billion.
Last year at this time there was 7.750 billion bushels in storage.
The trade projected 1.556 billion bushels of soybeans in storage. The report had 1.531 billion bushels.
Last year at this time there were 1.327 billion bushels left in storage.
In wheat, USDA reported 1.372 billion bushels in storage after the last three months use.
The trade was expecting 1.356 billion bushels.
Last year there was 1.140 billion bushels in storage.
The increased corn acres caused the market to react last Thursday.
December corn dropped 16 cents within the hour to $3.67. November 2016 beans were $9.20 on March 31 after the report, down only 2 cents.
Beans had risen nearly 30 cents for the month due primarily to the increase in Malaysian palm oil pricing.
Could be that this report could shift some acres back to beans.
In wheat, July wheat was $4.73, up a cent and a half after the report was released.
I attended a very informative Allendale webinar. It was presented by Eric Norland, CME Group, and covered debt.
Norland spoke about the consequences of debt by various countries around the world.
He explained there are two types of debt: Public sector, and Private sector in each country.
The private sector debt includes individual and non-bank corporations.
Holden used an index of debt to gross domestic product — monetary measure of the value of all final goods and services produced annually to discuss these countries.
Why is this important to you?
U..S grain exports have shrunk in recent months because we are not price competitive.
We have blamed the strong dollar for this. Norland, however, pointed out that several currencies from around the world have been devalued due to their debt crisis and the U.S. dollar has strengthened in comparison as a result.
Norland pointed out that when a country’s debt to GDP rises above 250 percent, the country seems to have problems.
He pointed out that the U.S. ratio is currently 250, Japan’s was 400, Hong Kong 300, Canada 270, and China has now reached 250. This indicator suggested China grain imports will slow.
The take-home message I got from this presentation was that U.S. grain exports may be pressured for a period of time and this low price cycle maybe with us for years.
In other news the state administration of grain in China officially confirmed it would end the annual government stockpiling plan starting this fall.
They will now offer farmers direct subsidies.
Allendale warns us not to get too excited since there has been no change in their import policy and there likely won’t until government stocks are narrowed down quite a bit.
If this holds, however, they could restart their corn export program?
If you are still negotiating cash rents, I suggest you take a look at the March 22, 2016 article, “Downward Pressures on 2016 and 2017 Cash Rents” by Gary Schnitkey, University of Illinois, found at farmdoc daily.(Note: I research material from Allendale, DTN, USDA, University Land Grants and a other credible sources in compiling this article. It is not merely my opinion, but rather a consensus of experts in the trade. Confused by the jargon? Looking for a marketing coach or someone to brainstorm and discuss strategies with? Contact me at
, or call 410-708-8781.)