USDA releases Quarterly Stocks and Acreage reports tomorrow. A whirlwind planting season inevitably caused slight deviations from late March estimates and the onset of a worldwide pandemic created drastic consumer shifts in a very short amount of time. Tomorrow’s reports will provide more clear insights to changing consumption rates and acreage adjustments for grain crops, as outlined below.
All eyes will be on corn and soybean acreage in tomorrow’s acreage report. High November ‘20 soybean futures prices relative to December ’20 corn futures prices in the early days of planting led some farmers to switch acreage from corn at the last minute this spring.
Many farmers in North Dakota did not finish harvesting last year’s corn crop until the end of May after another cool and wet spring. In many cases, farmers were not able to transition quick enough to finish planting corn in the narrow window available, sending many acres into soybeans or prevented plant.
The cold and soggy spring in North Dakota weighed heavily on spring wheat acreage too. North Dakota, which is the nation’s largest grower of spring wheat, also struggled to sow spring wheat seedlings ahead of final planting dates suggesting some of these acres might be converted into soybeans, which had a later prevented plant date than spring wheat and corn.
What could cause a big price change? Corn markets have already priced in high acreage. Average trade estimates place USDA’s projection at 95.2 million acres so a figure on the lower end of the trade range – likely between 93-94 million acres – that could potentially send final production estimates under 16 billion bushels would likely give corn markets upward price momentum tomorrow.
Soybeans could face lower prices if USDA’s acreage estimates come in at or above 95 million acres. But market prospects still remain strong for soybeans amid increasing demand from China and expected seasonal increases in exports.
While the new crop price ratio provides more value to farmers during winter while planting plans are underway, it is worth noting that the November ’20 soybean – December ’20 corn price spread has regularly traded above the 2.5 mark, indicating a strong market preference for new crop soybeans going into the report.
North Dakota’s rocky start to spring wheat planting could help reduce overall wheat acres in tomorrow’s report. If spring wheat totals dip much below 12.4 million acres in tomorrow’s report, falling prices may see some stability. But with a 28.4 billion-bushel record global production high forecasted this year and a weaker dollar, U.S. wheat prices could continue to struggle through harvest season.
Market focus will turn to yields after the report is released tomorrow. Long-term forecasts are favorable for growing degree days, with plenty of warm temperatures present in the 30-day NOAA outlook. Rain forecasts over the next month are expected to be at or slightly above normal, which will only benefit crop development.
But warm temperatures and dry weather over the next two weeks could strain pollination. With early numbers in, weather stress on yields will begin to play an even more significant role in price determination.
Corn usage is expected to decline from previous consumption rates between March and June. The pandemic eroded ethanol demand as global citizens reduced their travel to limit the spread of coronavirus. In April 2020 alone, corn consumed for ethanol fell 195.5 million bushels, or 44.4%, from April 2019 to 245.0 million bushels. The average trade estimate of 4.95 billion bushels for June 1 corn inventory will reflect one of the lowest third quarter usage rates – 37.7% - in the past seven marketing years.
Despite record domestic crush demand, third quarter soybean usage is only expected to total about 861.3 million bushels amid lower export demand in the early days of the coronavirus pandemic. Third quarter usage was slightly higher than the same period last year due to increased soybean meal demand as livestock producers temporarily shifted away from DDGS during April, so tomorrow’s report could show lower than expected soybean stocks.
Though export demand lagged in the fourth and final quarter for the 2019/20 wheat marketing year, an increase in human consumption of flour and bread products due to coronavirus -related stockpiling will likely result in the lowest June 1 wheat stock inventory of around 980 million bushels – the lowest since the fourth quarter of 2015/16.