Acreage report ‘big boost to corn bulls’

KANSAS CITY, Mo. — In the months leading up to the prospective plantings report, expectations were a reduction in corn acres, but the reduction well surpassed the trade estimates.

Farmer surveys in the U.S. Department of Agriculture’s prospective plantings report on March 28 indicated 90.036 million corn acres nationwide, compared to 94.641 million in 2023. The trade’s average pre-report expectation was 91.776 million acres.

USDA put the nation’s soybean planted acres at 86.51 million, compared to 83.6 million last year and the trade guess of 86.53 million.

Arlan Suderman, StoneX chief commodities economist, noted the numbers and potential impact on the balance sheets during a post-report webinar.

Projected corn acreage was 1.74 million below the average trade guess, while the other crops’ acreage were within the expected range. What are your thoughts on the planting intentions for corn?

These numbers are all changed by the June 30 planting report, but this is the baseline we have that USDA will likely use in their first look at the 2024-2025 marketing year balance sheets that will be released in May. That’s why they have importance to the markets.

The corn acreage coming in smaller than expected is a big boost to the corn bulls. Things looked pretty bearish ahead of that.

When I put in the corn acres that USDA gave, and I use USDA’s trend-line yield that they gave us in February which we expect them to use in their May balance sheet, that still gives us ending stocks of 2.2 billion bushels based on my usage estimates.

So, there’s nothing bullish about that, but what we’ve done now is we’ve seen corn being spread against soybeans on this report, supporting corn while pressuring soybean prices.

Say we have a weather risk and we pull the yields 5% below trend, that does turn into something because then you drop stocks down to 1.5 billion bushels. That’s where the market starts getting concerned.

On the other hand, of you have a very good growing season and bump it 5% above trend yield, then you’re looking at 3 billion bushels carryout.

What would the planted acres projection do potentially for the soybean supply and demand sheet?

On the soybean side, acreage came in pretty close to expectations. You plug in this acreage number with USDA’s 52-bushel per acre yield, it gives you ending stocks based on my demand projections in the upper 500 million range.

If you take 5% off yield, it gives you 368 million bushels. If you add 5% on top of trend yield and you get over 800 million bushels carryout.

So, how the weather goes this summer is going to be big, but regardless under those scenarios, we still see soybean stocks increase over the coming year, and that’s another reason we’re seeing corn spread against soybeans in the initial reaction to the report.

Were there any other issues that stood out in the prospective planting report?

We lost 6.3 million acres from a year ago in the principle crops, according to USDA. Principle crop total acreage fell from 319.6 million acres in 2023 to an anticipated 313.31 million this year.

That’s highly unusual and a highly rare event to lose that many acres unless there’s been a major weather event like widespread flooding or drought, so the crops simply don’t get planted. It’s very rare to have that big of a one year change in acreage.

So, I say there’s a possibility that we’ll see a correction or an adjustment to those acres in the June planting survey, and that may impact soybeans.

How much of those acres might soybeans get that would push that acreage number higher? I don’t expect the acreage to come down, but it’s possible that we could see it go higher as those acres come in.

Is it the economics? Is it crop rotation? What drives the shift between crops?

As we look at the rotation, it’s not 50-50 every year. We were a little bit heavier on the corn acres last year in that rotation, so this year we’d expect to be a little lower in the corn acres in the rotation.

So, from the core of the Midwest standpoint, we were expecting to see a little bit of a shift from corn to soybeans. These numbers were a little bit more than what we anticipated indicating additional factors.

Those areas around the core of the Midwest comes down to more specifically the economics and the fact that inputs on corn are much higher this year, making soybeans more favorable.

We did pick up some cotton acres in the Mid-south and in the Delta area, some rice acres, as well, that were competing with soybeans, but otherwise soybeans were a very competitive option across the board.

Then when you throw in the additional crush capacity, the additional markets that we’re getting for soybeans and developing with our checkoff dollars, then that gave us some better opportunities on the revenue side to help boost soybeans in some of those decisions to get the additional acreage.

USDA also released is quarterly stocks report that marks the midway point of the marketing year. Corn supplies were estimated at 8.347 billion bushels, soybeans at 1.845 billion bushels and wheat was 1.087 billion bushels as of March 1. What do you think of those numbers?

Corn came in about 80 million bushels below expectations and that suggests that maybe we’re feeding a little bit more and we know that is likely to be the case because cheap prices are giving some stimulus for feeders to put more pounds on both the cattle and the hogs. That’s on top of the increased grind for ethanol, as well as exports.

So, I do expect that we’ll see corn ending stocks projections for the currently year to eventually drop close to that 2 billion bushel range. That’s still a lot of corn, but it’s moving in the right direction.

Was there anything surprising in the on-farm and off-farm stocks in quarterly report?

There was nothing really surprising to me. We have more supplies, both on-farm and off-farm overall, because we’ve built so much more storage on the farm, but nothing in the stocks report that really stood out to me to be significant.

The bottom line is the U.S. farmer still does have a little bit more than what he normally does to sell, so he’s looking for rallies to sell.