Extended Covid-19 Precautions Lead to Weaker Commodities
USDA Prospective Planting Report surprises for corn and beans
USDA Prospective Planting Report Surprises for Corn and Beans
- Corn planting intentions were reported at 97 million acres which was 2.5 million above trade expectations.
- Soybean acres were on the low side of estimates at only 83.5 million acres vs 84.9 million expected.
- Wheat area of 44.7 million acres was near trade expectations and little changed from last year’s 45.2 million.
FBN’s Take On What It Means: Taken at face value, the data is negative for corn and positive for beans. If the USDA holds the Outlook Forum demand, 2020/21 corn carry-out would balloon to over 3 billion bushels while bean carry-out would fall under 300 million bushels . However, the survey was completed before the sharp drop in corn futures/basis. We should expect this to be the largest corn acreage number of the year on the expectation that states most susceptible to ethanol demand will lead the change to beans. Bean acreage from March to the June acreage report has seen planted area increase in 8 of the past 10 years, and price has rallied 65 cents since mid-month while corn has broken on weak energy prices and ethanol demand, making it likely bean planted area will be higher than yesterday’s intentions. While we believe current prices have discounted higher acreage to some extent, it will be hard for corn especially to sustain a move higher without significant changes in supply/demand which is negative for US producers.
March 1 Quarterly Stocks Report About As Expected
- Corn stocks were 7.950 billion bushels (bbu) which is down sharply from the 8.613 bbu last year.
- Soybean stocks came in slightly larger than expected, 2nd largest in history, at 2.253 bbu.
- Wheat stocks at 1.412 bbu were close to the average estimate of 1.430 bbu.
FBN’s Take On What It Means: FBN believes the stocks report being fairly close to expectations presents an overall neutral outlook for farmers. The corn stocks number implies Q2 Feed & Residual use was 1.392 bbu vs 1.195 bbu last year and brings the implied year to date feed use to 4.009 bbu vs 3.400 bbu last year. This is the highest implied first half Feed & Residual usage since 2008 which is warranted given the growth in animal numbers. Higher feed offsets a portion of lost ethanol demand. Bean stocks imply a large negative quarterly Feed/Seed/Residual at -55 mbu. Stocks are higher due to thin exports and the possibility last year’s crop is still being underestimated. The April report will be the first chance for the USDA to give guidance on changes in full year Feed & Residual and ethanol.
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