The March 31 USDA Planting Intentions and Quarterly Stocks report is generally one that provokes volatility, with limit moves common after the release. This report didn’t disappoint. Given what we learned, there could be some big implications on price action as we get into the growing season.
For context, look at the USDA Outlook Forum numbers released in February. Those estimates were 92 million acres for corn and 88 million acres for beans. USDA felt corn and bean acres would narrow the gap from 2021’s 6-million-ish level, but felt big corn prices would keep corn king.
The average trade estimate for corn was right at 92 million acres for this report as well, with beans coming in at 88.7 million. However, the range of estimates were 89.7 to 93.5 for corn. Therefore, the actual number of 89.5 million acres came in below the lowest estimate. This is important to note and highlights just how bullish this acreage estimate is. For reference, the AgMarket.Net estimate was 90.7 million.
The actual number of 91 million acres is a record for beans but actually fell within the range of guesses. With the range from 86 ma to 92.2, there was certainly a wide range of thoughts regarding where acreage might come in. Given USDA’s bean acres were towards the upper end of the range, it was certainly viewed as a bearish report from a soybean standpoint. Again for reference, the AgMarket.Net estimate was 89.8. Our team felt strongly bean acres would be very close to corn acres given high fertilizer prices and strong bean prices as well.
What do the numbers mean?
For corn, if we plug 89.5 million acres into the balance sheet and carry in the 1.44 billion bushels USDA currently forecasts for carry this year, we would need a 180-bushel yield just to keep carry above 1 billion-bushels carryout. This is using current estimates on demand which are quite similar to this year’s estimates. A 182 bu. per acre yield would put carry at just 1.33 billion bushels.
The upside? The corn market may look at this report and feel the need to buy acres. With current prices at $6.80, or 90 cents above the February average, it’s interesting we’re talking about a potential need to rally more.
Conversely, when we plug 91 million acres into the bean balance sheet, the carry with a 51.5-bushel yield would come in at over a half-billion bushels! This is using USDA’s current 285 million-bushel carry for this marketing year. A yield of 54 bu. per acre would result in a carry of 750 million bushels.
Now, my team with AgMarket.Net feels as though bean carry for this year will fall well below the current 285 million bushel estimate, but with these acres, the tightness in bean stocks could become a bit less burdensome, especially with a normal-sized 2022 crop.
Long story short, the report was bullish corn, bearish beans. This doesn’t mean corn is going to rally. We could actually see a more bearish bean situation keep corn prices from going significantly higher.
The main point here is there are no guarantees. In my opinion, a producer would be wise to use this strong rally in the corn market to quantify some worst-case scenarios. Given where profit margins are for most, they’d be locking in some great income.
I wish you much success for this 2022 growing season that lies ahead!
Feel free to reach out to me or anyone on the AgMarket team. We’d love to hear from you.
Reach Matt Bennett at 815-665-0462 or [email protected].
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