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"Heel-dragging' on ethanol projection?

Allendale’s Joe Victor offered this bit of evidence. In six out of 10 years, USDA reduced corn acreage an average of 500,000 acres from early-season estimates and in eight out of 10 years, added an average of 500,000 acres to soybeans.

Of course, crop statistics are like the weather. If you don’t like what you see, just wait a couple of days, and things will change.

“The sad thing is that these things usually come out about the time we’re off on a good rally, and it becomes a big disadvantage for the producer,” says Victor.

For example, “If we use today’s (June 30) acreage report and today’s trend yields, you’re looking at a projected 10-billion-bushel corn crop. But peeling off an extra 500,000 acres of corn could lower the size of the U.S. crop to as low as 9.935 billion bushels.” Which could help prices, especially if demand is strong.

But Victor thinks USDA might have been off the mark there too. While feed use for corn is flat, “we believe that use for ethanol is up 36 percent from year ago levels. But USDA is still dragging their heels reporting it’s only 30 percent higher.”

There were other surprises in USDA’s latest report. At the end of June, USDA reported third quarter soybeans stocks at 602 million bushels. Earlier, it increased ending stocks in its June 11 report from 135 million bushels to 140 million bushels.

USDA came up with these numbers believing there would be a slowdown in U.S. export sales. “A lot of that was coming from fewer U.S. sales to China due to sales being picked up by Brazil,” Victor said. “But lately, we’ve seen some switching and some outright buying by China from the United States over Brazil beans.

“So instead of 602 million in stocks, we’re (Allendale) sticking with 530 million bushels. So by the time we get into a three-year average use on soybeans of 650 million bushels, we’re going to come up with a 127 million bushel ending stocks by September.”

Victor sees good support for corn at $2.27, up to $2.56 and $5.50 for new crop soybeans, with a trade range of $5 to $6.

“We continue to produce bigger and bigger crops, but the good news for producers is that the usage is there and the stocks-to-use ratio is historically tight in corn and wheat and is relatively tight in soybeans.”

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