Planting pace above five-year average

Planting pace above five-year average

WASDE report reveals tighter old-crop stocks as farmers make significant planting headway.

DURING the week ended May 11, farmers took advantage of good weather to surpass the five-year average planting pace for both soybeans and corn.

According to the U.S. Department of Agriculture's latest "Crop Progress" report, 59% of expected acres had been planted to corn, a 33% increase over the year-ago period and 1% higher than the five-year average. The trade expected farmers to have 55% of corn planted, but most states — except Michigan, Minnesota, North Dakota and Wisconsin — were able to make great strides.

The percentage of acres planted to soybeans was also higher, at 20%, a 15% increase over the year-ago period and 1% higher than the five-year average. The soybean planting pace came in higher than the trade estimate of 17%.

While significant planting progress has been made, cooler temperatures could become an issue for crop development, according to Planalytics. As of May 11, USDA reported that 18% of corn had emerged, and the near-term weather forecast was expected to be decent.

 

WASDE report

USDA also recently released its May "World Agricultural Supply & Demand Estimates" (WASDE) report in which it pegged 2014-15 corn production at 13.9 billion bu., up slightly from the 2013-14 record, with higher expected yields more than offsetting a year-over-year reduction in planted area. Corn yield was projected at 165.3 bu. per acre, up 6.5 bu. from 2013-14 assuming normal mid-May planting progress and summer weather.

Allendale Inc. said, however, it was surprised that USDA did not lower the corn yield number from what it projected at the February Agricultural Outlook Forum.

U.S. corn use for 2014-15 was projected to be 2% lower than in 2013-14, with feed and residual use projected to be 50 million bu. lower due to fewer animals in production than last year. Exports for 2013-14 were projected to be 200 million bu. lower as larger expected foreign supplies and reduced import demand have limited U.S. shipments.

Corn used to produce ethanol in 2014-15 is expected to be unchanged from this year, with gasoline consumption expected to remain flat in 2015.

USDA lowered domestic old-crop corn stocks even further to 1.146 billion bu., which surprised the trade as the average estimate was 1.314 billion bu. (Table 1). Corn ending stocks for 2014-15 were projected at 1.726 billion bu., up 580 million from the 2013-14 projection. With the larger carryout, the season-average farm price was projected at $3.85-4.55/bu., down from $4.50-4.80/bu. for 2013-14.

USDA slightly lowered 2013-14 world corn ending stocks from its estimate last month, but the May report increased global old-crop ending stocks from 158.00 million metric tons to 168.42 mmt (Table 2). In the first estimate for 2014-15, USDA projected world ending stocks at 181.73 mmt; the average trade estimate was much lower, at 159.41 mmt.

Steve Georgy with Allendale said the increase in ending stocks has a bearish implication, and the trade is being very cautious since a large crop is expected for 2014-15.

Corn production in Argentina for 2013-14 stayed the same at 24.0 mmt, but USDA increased Brazil's corn production estimate to 75.0 mmt, higher than the average trade estimate of 72.1 mmt (Table 3).

U.S. oilseed production for 2014-15 was projected at 107.9 million tons, up 11% from 2013-14. USDA said increased soybean production accounted for most of the change.

Soybean production was projected to be a record 3.635 billion bu., up 346 million from the 2013 crop based on record yields and harvested area. Soybean yield was projected at a trend level of 45.2 bu. per acre, up 1.9 bu. from 2013. Supplies were projected at 3.78 billion bu., up 7.4% from 2013-14 as a larger crop more than offset lower beginning stocks and imports.

Georgy explained that Allendale and much of the grain trade believe USDA will add 1-3 million more acres planted to soybeans after it conducts a June resurvey of farmers.

The U.S. soybean crush for 2014-15 was projected at 1.715 billion bu., up 20 million from 2013-14, mainly reflecting increased domestic soybean meal consumption. Despite lower prices, soybean meal exports were projected to increase only slightly, with Argentina soybean meal exports accounting for most of the gains in global soybean meal trade.

"Higher domestic crush and exports were almost offset completely by increases in imports and lower residual (use). Old-crop stocks declined from last month's 135 million estimate to 130 (million bu.). This was near the average guess of 134 (million bu.)," Allendale noted. "In the coming months, expect any slight increases left for usage to be offset similarly. Additionally, don't forget USDA's ace in the hole. On the coming Sept. 30 'Grain Stocks' report, don't be surprised to see them revise the 2013 harvest higher."

In regard to tighter domestic old-crop stocks, Arlan Suderman, senior market analyst for Water Street Solutions, said USDA appears to be finally recognizing the crush pace and also expressed concern over whether U.S. infrastructure could handle the extra demand.

Despite gains in use, soybean ending stocks were projected at 330 million bu. for 2014-15, up 200 million from 2013-14, increasing the stocks-to-use ratio to 9.6%. The U.S. season-average soybean price for 2014-15 was forecasted to decline to $9.75-11.75/bu., compared to $13.10/bu. in 2013-14. Soybean meal prices were forecasted at $355-395 per ton, compared with $485 for 2013-14.

South American soybean production remained unchanged for 2013-14.

 

Market recap

The market's reactions to the May WASDE report were somewhat inconsistent between corn and soybeans.

Instead of focusing on tighter U.S. old-crop corn stocks, the trade chose to focus on higher old-crop global ending stocks and 2014-15 global and domestic stocks, sending nearby corn prices lower. Additionally, lower prices were also the result of improved weather conditions last week that allowed farmers to continue planting.

Nearby corn prices fell last Monday to close at $4.975/bu. but found support from soybeans on Tuesday to settle at $5.0325/bu. The improved corn planting progress, however, sent prices lower, and May contracts closed lower on Thursday at $4.8425/bu.

Soybean prices, on the other hand, rallied after USDA reported even tighter domestic old-crop stocks due to an increase in exports and crush margins. Suderman said the soybean stocks numbers were a wake-up call for the trade and perhaps are even a record for this time of year.

May contract soybean prices were supported by the stocks news for most of the week, with highs exceeding $5.00/bu. each day. Improved planting conditions, however, meant farmers made good progress through last week, sending nearby prices lower to settle at $14.7025/bu. on Thursday.

 

1. U.S. ending stocks, billion bu.

 

USDA

Average

Trade

USDA

2013-14

May est.

est.

range

April est.

Corn

1.146

1.314

1.231-1.435

1.331

Soybeans

0.130

0.134

0.125-0.174

0.135

Wheat

0.583

0.588

0.570-0.633

0.583

2014-15

Corn

1.726

1.672

1.295-2.354

N/A

Soybeans

0.330

0.307

0.200-0.464

N/A

Wheat

0.540

0.553

0.425-0.652

N/A

 

2. World ending stocks, mmt

 

USDA

Average

Trade

USDA

2013-14

May est.

est.

range

April est.

Corn

168.42

157.31

149.45-161.20

158.00

Soybeans

66.98

69.77

67.30-73.00

69.42

Wheat

186.53

185.95

181.91-189.00

186.68

2014-15

Corn

181.73

159.41

149.90-175.00

N/A

Soybeans

82.23

80.34

67.00-95.00

N/A

Wheat

187.42

184.53

178.00-200.00

N/A

 

3. South American 2013-14 crop production, mmt

 

USDA

Average

Trade

USDA

Argentina

May est.

est.

range

April est.

Corn

24.00

23.86

22.30-25.00

24.00

Soybeans

54.00

54.40

53.50-57.00

54.00

Brazil

Corn

75.00

72.10

70.50-74.00

72.00

Soybeans

87.50

87.23

86.50-87.50

87.50

Sources for Tables: Reuters, USDA.

 

 

Volume:86 Issue:20

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