April 16, 2021

Prospective planting estimates light up markets

Razor-thin stocks expected

MINNEAPOLIS — The year’s first survey-based look at planted acres opened the bull gates and sent the corn and soybean markets limit-up soon after the prospective plantings report was released March 31.

Providing fodder for the bulls was that the corn and soybeans anticipated planted acres were about 2 million bushels each less than pre-report average trade estimates.

Randy Martinson, Martinson Ag Risk Management founder, provided his take on the U.S. Department of Agriculture’s prospective plantings and quarterly stocks reports in a Minneapolis Grain Exchange-hosted teleconference.

What is your overall reaction to the USDA planted acres numbers?

“This was not exactly what we were expecting to see. We were thinking that it might have been a little bit friendly to the markets, but it turned out to be extremely bullish.

“Corn and soybeans are the biggest gainers of the report with corn up the 25-cent limit (immediately after the report’s release), soybeans up to their 70-cent limit. Soybean meal is close to its limit, and we’re also seeing soybean oil close to its limits of almost $2.

“There’s good strengths in the market, a lot of it coming off of what was not expected to be seen in this report.”

With current marketing year ending stocks shrinking, the soybean planted acres were a major focus going into the prospective plantings report.

“This is what everybody was looking at. We needed to add at least 7 million to 8 million acres to make the supply and demand numbers work. We did not do that. The acres are coming in at 87.6 million. That’s only up 5% from last year. It’s 2.4 million acres less than expected, 4.5 million above last year and far short of the 90 million acres we need to kind of make the supply and demand work.”

What would be the impact of not getting those additional 7 million acres of soybeans to make the supply and demand tables work?

“Sharply higher prices until we get those acres or demand is trimmed enough to be able to make those supply and demand numbers work. We need to either push prices sharply higher than they’re at, which means we will rival our recent 2020-2021 high for price just to try to ration the supply that’s out there.

“Exports have slowed down, but we need to slow down crush at this point. We just have to get prices up to slow it down.”

What were the surprises in the corn prospective planting acres numbers?

“Corn acres were surprisingly lower than expected at 91.1 million acres. That’s 2.1 million less than expected by the trade and only 320,000 above last year. There are a lot less corn acres than anticipated and soybean acres are quite a bit lower than anticipated.”

The quarterly grain stocks estimates were also released by USDA. Did they meet the trade expectations?

“Wheat stocks of 1.3 billion bushels were 7% off of last year. On-farm stocks were 16% lower. Off-farm stocks were down 4% from a year ago. That’s 36 million bushels more than expected by the trade and 100 million less than last year.

“In the corn, stocks came in at 7.7 billion bushels, down about 3% from last year. On-farm stocks were down about 9% and off-farm were up 5%. That’s about 66 million bushels less than expected, but 251 million less than a year ago.

“For soybeans, stocks came in at 1.5 billion bushels, down 31% from a year ago. On-farm stocks were down about 41%. Off-farm was down about 22%. Now this was about 30 million bushels more than expected by the trade, but 691 million bushels less than last year.

“There might be some adjustments to the demand numbers because of this, especially with corn, it’s likely we’ll see and increase in ethanol or in feed demand. For soybeans we might see a little bit of an adjustment in residual because the higher than expected numbers.”

What’s the next benchmark? Is it the planted acreage report the USDA will release in June?

“It will be because right now they’re going to take these numbers and apply them in May to the supply and demand estimates and it’s going to be interesting. If they go along with what the Ag Outlook Forum came with, we’re going to see a tremendous drop in our stocks estimates for the 2020-2021 marketing year.

“Two million acres less than expected for corn would roughly mean a 300 million bushel decease in stocks, which now instead of it being 1.5, 1.8 billion, now we’re all of a sudden going to be closer to 1.1 to 1.3 billion bushels for corn ending stocks. So, that’s going to mean that we’re going to have to do some adjustments on the demand side.

“It’s the same scenario playing out for soybeans. If we get an average yield of let’s say 50 bushels per acre with the 2 million acres less than expected, you’re taking 100 million bushels off that ending stocks estimate. USDA was estimating 2020-2021 ending soybean stocks of 145 million bushels. That means we have an ending stocks estimate of 45 million bushels if you leave the demand structure unchanged from what the Ag Outlook Forum said in February.

“That’s tough to make that work. That’s why prices have to go up so we can curb some sort of demand that’s out there because right now it’s going to be razor-thin stocks at this point if we don’t see something happen.”

Tom Doran

Field Editor