Updated: Charts added.
Grain futures are sharply lower this morning, led by selling in corn following a bearish production estimate from USDA that showed farmers planted more acres than expected.
“USDA has spoken, but what exactly did they say?” asks Farm Futures senior grain market analyst Bryce Knorr. “The disconnect between huge prevent plant acreage for corn and the agency’s planted and harvested estimates awaits further explanation – and likely adjustment. There’s a good fit between prevent plant acreage for corn and adjustments to final acreage from August estimates, but these changes, as well as adjustments to yields, will take time to play out.”
With funds still long, Knorr says speculators are retreating to the sidelines for now. The question becomes: In the short-term, will they begin to sell more?
“Corn was still at the 25-cent limit, so if it doesn’t lock up completely the worst may be over,” he says. “End users may see this as a gift, but the big specs may be more cautious.”
For corn, the agency dropped its planted acre estimates by 1.7 million acres from July, now at 90.000 million acres. But trade estimates were well below that tally, with an average guess of 87.656 million acres. USDA also lowered its harvested acreage estimates from 83.600 million acres in July down to 82.000 million acres. Analysts expected a bigger drop, to 80.050 million acres.
Today’s data also revealed a record 11.2 million acres of prevent plant acres, says Farm Futures senior grain market analyst Bryce Knorr.
“That easily surpassed the old record of 3.6 million and suggests farmers may have planted millions of acres as a cover crop or just get an MFP,” he says. “Those fields are unlikely to be harvested for grain, but instead will be cut for sileage.”
With the downward revisions to harvested acres, USDA now projects a total U.S. corn production of 13.875 billion bushels, with average yields totaling 166.0 bushels per acre. That’s moderately above trade estimates of 13.146 billion bushels on average yields of 164.9 bpa.
Farm Futures, which regularly participates in these analyst surveys, included production estimates of 12.723 billion bushels on average yields of 167.2 bpa.
USDA pushed soybean acres down farther than analysts expected, meantime. The agency’s assessment for August was for 76.700 million planted acres and 75.900 million harvested acres. Compare that to analyst estimates of 80.947 million planted acres and 79.890 million harvested acres.
Per-acre yield potential is somewhat of a different story. USDA held steady its projection of 48.5 bpa from a month ago, while analysts expected, on average, a decline to 47.4 bpa. Still, with fewer harvested acres, USDA is estimating a total production of 3.680 billion bushels, down from the agency’s estimate of 3.845 billion bushels in July. Analysts had expected a more modest drop, to 3.786 billion bushels.
As with corn, USDA says soybean prevent plant acres reached record levels in 2019, with 4.35 million acres.
“The soybean numbers were modestly friendly, with acreage reflecting prevent plant filings,” Knorr says. “But supplies are adequate, and demand isn’t likely to improve. Chinese growth will be slow, whether or not they purchase soybeans from the U.S. But beans face some warmer and drier weather in August, when yields are traditionally made. That may be enough to keep the marketing from getting too bearish.”
Unlike corn and soybeans, U.S. all-wheat production estimates moved moderately higher in August, with USDA now estimating a 1.980-billion-bushel production potential, up from 1.921 billion bushels in July. The upward revision was fueled by gains in hard red winter wheat, white winter wheat and spring wheat production.
“The large wheat production estimate today is bearish, and the market reflects it,” Knorr says. “USDA’s optimism over export potential may play out but will take time to be proven and may have to wait until spring wheat harvest is over.”
USDA’s data for 2018/19 and 2019/20 ending stocks was mixed, meantime. For corn, 2018/19 ending stocks moved slightly higher, to 2.360 billion bushels, with 2019/20 ending stocks up moderately to reach 2.181 billion bushels. Soybean ending stocks this year also moved slightly higher, to 1.070 billion bushels, but next year’s ending stock estimates saw a moderate decline to 755 million bushels. And wheat ending stocks moved higher, with 1.070 billion bushels this year and 1.014 billion bushels next year.
2019/20 world ending stocks were also a mixed bag, as corn (302.72 million metric tons) and wheat (205.4 MMT) took a moderate leap higher, while soybeans (101.74 MMT) eased by 2.6%.
USDA’s estimates for South American grain production was unchanged from July. That included estimates of 2.008 billion bushels of corn and 2.058 billion bushels of soybeans in Argentina, plus 3.976 billion bushels of corn and 4.299 billion bushels of soybeans in Brazil.