WASHINGTON — USDA estimates of planted acreage was a surprise for corn at 92.3 million acres, more than the March prospective plantings report and more than what all of the trade had estimated.
U.S. corn growers increased the planted acreage by 4.1 million acres from last year. This is a third consecutive year of increased corn acreage and is the second-largest corn acreage in more than 60 years, following only 2007 with its 93.5 million acres.
But USDA’s projection for soybean planting went the other way. Less is being planted, compared to what the traders expected, and less than the March Intentions report.
And with that, the markets reacted. The value of corn and soybeans nose-dived today, following USDA’s long-awaited Planted Acreage Report and the Quarterly Grain Stocks Report. July corn closed 69 cents lower, and had been 82 cents lower at one point.
Overall, farmers planted 319.2 million acres to major crops this year.
Flooding no impact?
USDA’s Planted Acreage Report indicated that 92.282 million acres were planted and 84.888 million acres will be harvested. Both were well above the range of trade estimates.
In the report’s notes, USDA said even though a slow start to the planting season and many delays, particularly in the eastern Corn Belt corn was finally planted by June 12.
Although extensive flooding had been documented along Upper Midwestern Rivers, that issue was not addressed by USDA, other than to refer to flood water of the Ohio and Mississippi Rivers as working its way downstream.
USDA statisticians reported, “At the time of the survey, a large percentage of acres remained to be planted in four states: Minnesota, Montana, North Dakota and South Dakota. To better assess planted acreage, NASS will resurvey the growers in these states in July.” There was no indication if a resurvey would occur in either Ohio or Indiana, where similar situations existed with the wet weather.
Ohio farmers put 3.5 million acres of corn in the ground in 2011, up from last year’s 3.45 million planted corn acres.
And there was no indication if USDA would attempt to factor in the lost acres along the major rivers, which would represent an adjustment on harvested acres.
The USDA’s notes about soybeans included a 75.2 million acre projection, which was well below the range of estimates from traders. That acreage would be the least since 2007, which was the high water mark for corn.
Interestingly, USDA said acreage decreased in 21 out of the 31 soybean-producing states.
The statisticians reported on delayed planting for beans along with historic flooding, but did not indicate any acreage had been lost as a result of the flooding.
The nation’s cotton farmers also reported a significant acreage increase this year. According to the report, 13.7 million acres have been planted to cotton, up 25 percent from last year. The largest increase was reported in Texas where the growers planted 1.6 million acres more than in 2010, up one million acres from March intentions.
There’s still some questioning of the accuracy of the USDA numbers. Carl Zulauf, an ag economist at Ohio State University, cautions that these are just “guesses by USDA.”
“I think they’re the best guesses anyone can have,” he added, “but there’s always the question of ‘How accurate is the guess?'”
The next round of USDA crop production and supply and demand reports will be available July 12, and the June 30 acreage report will improve the accuracy of the guess. By that time, Zulauf said the USDA will have more information because it is later in the growing season and the effects of weather and other growing season factors on yields will be more apparent — especially in corn and wheat.
Along with the acreage report, USDA released estimates for grain stocks. Corn stocks were estimated at 3.67 billion bushels, which were left after three-month usage of 2.85 billion bushels. That was well below the 3.38 billion bushels consumed in the comparable period of 2010.
Farmers are holding 1.67 billion bushels of corn says USDA.
Soybean stocks were estimated at 619 million bushels, up 8 percent from the same period of last year. Disappearance was estimated at 630 million bushels for the quarter, which was down 10 percent from year earlier levels. USDA says farmers are still holding on to 218 million bushels of beans.
Ohio State’s Zulauf said that while supply is the biggest concern in the market today, demand issues could be the main story of the year.
“The markets have become increasingly interested in trying to assess the impact of high prices on demand,” he said. “There is some evidence that these prices are, in fact, curtailing demand, but the question is, ‘How much?'”
Considering the adage that “the best cure for high prices is high prices,” Zulauf said the story of 2011 could end up being the proof of that tried trader wisdom.
Economy as whole
Adding to those concerns are evolving large-scale economic issues, including the strength of the U.S. economy.
“It sure looks like our economy growth is slowing, but will the U.S. actually go into a double-dip recession? Time will tell,” Zulauf said.
Global economic issues, including debt situations in European nations such as Greece and China’s efforts to slow inflation in its economy, also weigh on market mentality, he said.
“The supply uncertainty is dominating the markets right now. But, the market is also very much trying to assess the consequences of high prices on demand, and of the macroeconomic issues on the market in general.”