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USDA Reports Are Well Off Trade Estimates

The highly anticipated USDA Planting Intentions Report was released Monday and caught some people by surprise. Corn planting intentions were placed at 86.014 million, which was more than 1.3 million acres below pre-report estimates. Soybeans also were outside of trade guess, but in the other direction. USDA says farmers plan to plant 74.793 million acres of beans, nearly 3 million acres more than trade guesses.

"USDA always seems to throw us a curveball and that is certainly true of this report," says Bryce Knorr, senior editor of Farm Futures magazine. "Corn was substantially below trade estimates down 8% from last year. And then kind of a one-two punch from USDA because the March 1 corn stocks number, 6.859 billion bushels, was more than 200 million below trade guesses."

Knorr says the combination of those numbers basically says we'll need either higher prices to stimulate more acres going into production or rationing demand, or we are going to need extremely good yields and excellent growing conditions over the Midwest this summer to meet expected strong demand. He says the report sets up for bullish trade for corn this spring.

Soybean acreage was increased by 18% from last year and every major soybean growing state increasing acres this year with heavy gains in the South and the Plains. Soybean stocks were well above trade estimates, which Knorr says suggests continuing adjustments to the government's "residual" usage estimate, a grab bag used to correct errors.

"The bottom line is we have proof soybean stocks aren't quite as tight and we've got plenty of acres," Knorr says. "That has the market probably looking at a sharply lower trade this week."

Wheat was a little bit bearish according to Knorr, although acreage was pretty much in line with trade guesses. Wheat stocks were slightly larger than predicted.

"I think probably the key this week is whether or not the weak soybean trade is so bearish that it offsets corn," Knorr says. "Beans have already broken substantially from their highs, more than $3 a bushel, so we've already had the market anticipating some bearish numbers here."

Knorr says with expanded trading limits in effect, a lot of damage can be done quickly to stabilize the soybean market. Another factor to watch is the ratio between soybean and corn prices. It has dropped from 2.50 to 1 to 2 to 1 and Knorr says if that ratio continues to drop sharply it could stimulate some more corn planting.