Last month USDA held their annual outlook conference. During this conference they provide 10-year projections for U.S. grains. Typically, during the first day they provide acres estimates for U.S. grains. Then during the second day they publish additional numbers that include supply and demand estimates, including ending stocks.
There are a bunch of numbers. To highlight a few: USDA estimated 2016 corn acres at 90 million acres, up from last year’s 88 million acres. Soybeans for 2016 were projected at 82.5 million acres. This is down ever so slightly from last year’s 82.7 million acres. Wheat acres continue their trend of shrinking from previous years, projected this year to be just 51 million acres. Last year U.S. wheat acres were 54.6 million acres. One way of looking at 2016 acres is to total corn, soybeans, and wheat, the three major U.S. crops. USDA puts the total for those three at 223.5 million acres, last year that total was 225.3 million acres. If you go the additional step to look at all U.S. grains, those acres are estimated to reach 272.8 million acres, down from last year at 275.8 million acres.
The ending stocks projections for 2016-17 corn were estimated at 1.977 billion bushels, up slightly from the 2015-16 ending stocks of 1.837 billion bushels. Ending stocks of two billion bushels or more only encourages the bears. So, producers, “Don’t feed the bears.” USDA estimated the 2016 corn yield at 168 bushels per acre. Compare that to the record yield in 2014 of 171 bushels per acre and last year’s 168.8 bushels per acre. Many producers and analysts are already thinking that such a high corn yield could be suspect this year. Their reasoning stems from looking at past years’ final corn yield. Rarely do you see the reality of actually obtaining three years in a row of record or near record yields.
Soybean ending stocks become a much more delicate situation. Ending stocks for the 2015-16 year are currently estimated at 450 million bushels. Next year for 2016-17, USDA puts ending stocks at 440 million bushels. Many are suggesting that USDA has soybean exports too high for both the 2015 and 2016 crop years. Those analysts are suggesting soybean ending stocks could reach 550 to 600 million bushels for the 2016-17 crop year. Two things come immediately to mind for soybean ending stocks. First, we are two months plus away from seeing U.S. soybeans planted reaching 50% or more.
Keep in mind that USDA is merely sticking their toe in the water with the February outlook numbers. The February numbers tend to be the low acres numbers for the year and increase with time. While weather can play a huge role, final acres numbers can vary significantly from the February outlook numbers. Second, is something that is hard to wrap your head around if you have not been a student of the market for decades. The 600 million bushel or higher ending stocks has been forecast numerous times in the past 15 years, only to be forgotten with time. Then months later, with additional demand or production-reducing weather issues, it has been reduced to 250 to 400 million bushels.
Producers will have until March 15 to make their final decisions on crop insurance for 2016 corn and soybeans. If they do take zero action, coverage levels will be the same as those seen for 2015. Premiums per acre look to be down slightly from 2015. Revenue protection for corn will be near $3.87 while soybeans will be near $8.86.
Corn and soybeans made new lows for the month of February in the final week of the month. During that same week, wheat made new six year lows. Anticipated higher production for Brazil’s corn and soybeans was partly to blame. Expect Argentina to be aggressive sellers of both soybeans and soymeal in the months ahead. Four dollar corn seems to be very hard to reach without some kind of weather issues in the next two months.
Thought for the day. “Hasbro announced they are making a new version of Monopoly to appeal to a younger generation. It won’t come with any cash, so you’ll have to borrow some from your parents’ Monopoly game.” – Jimmy Fallon.