Prospective corn plantings at highest level since 1937

by Ron Sterk
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Nearby May corn futures prices shot up the 40c-a-bu daily limit on March 30 even as the U.S. Department of Agriculture said U.S. farmers intend to plant 95.9 million acres of corn in 2012, the most since 1937 and well above trade expectations. The U.S.D.A. also estimated March 1 corn stocks at 6,009 million bus, the smallest since 2004, a figure well below trade estimates.

Soybean futures prices surged after the U.S.D.A. said farmers intend to plant 73.9 million acres, the smallest area since 2007 and also below trade “guesses.” Those were just three of several surprises from the U.S.D.A.’s annual Prospective Plantings and quarterly Grain Stocks reports.

“Even with expectations for a substantial jump in corn planted acres, the size of the reported planting intentions, 95.864 million acres, surprised even the most optimistic,” said Scott Irwin in the University of Illinois Department of Agricultural and Consumer Economics farmdocDAILY.

The corn planting intention number was up 4% from 2011, up 9% from 2010 and above the high end of pre-report trade expectations that ranged from 93.7 million to 95.7 million acres and averaged about 94.7 million acres.

Paul Meyers, chief agricultural economist at Foresight Commod-ities Services, Inc., said the U.S.D.A. number suggested a 2012 corn crop above 14,000 million bus, based on harvested area of about 88.9 million acres at 161 bus an acre. To date the largest corn crop was 13,092 million bus in 2009, the result of 86.4 million planted acres (79.5 million harvested) and an average yield of 164.7 bus an acre.

“The implication of the planted acreage estimate for the size of the 2012 crop hinges on yield expectations,” Mr. Irwin said. “On balance, a yield expectation of 160 bus for 2012 seems reasonable at the present time.”

He cited three factors affecting corn yields, including long-term versus short-term trend yield data with long-term estimates favored, the record March warmth that will promote rapid planting and the recent drier trend over much of the Corn Belt the past 90 days.

Farmers were off to a fast start with 3% of the corn crop planted as of April 1, slightly above 2% last year and as the 2007-2011 average for the date, according to the April 2 U.S.D.A. Crop Progress report. Corn in Illinois, the second largest growing state, was 5% planted as of April 1, with Indiana, Ohio and Nebraska all at 1%, compared with none planted in any of the four states last year or on average. Crop insurance restrictions prohibited farmers from planting too early in some cases.

“Our recent estimate is that early planting may add up to 2 bus per acre to the U.S. average corn yield,” Mr. Irwin said. Earlier planted corn pollinates quicker, usually allowing the key stage to miss the hottest, driest weeks of summer.

“Planted acreage is ex-pected to be up in most states compared to last year due to expectations of better net returns in 2012 compared to other commodities,” the U.S.D.A. said. “Record corn acreage is expected in Idaho, Iowa, Minnesota, North Dakota and South Dakota.”

Those potentially better returns appeared to sway farmers especially from soybeans and spring wheat, according to the U.S.D.A. data. U.S. soybean plantings indicated at 73.902 million acres were down 1% from 2011, down 5% from 2010 and below the low end of the trade’s pre-report estimates that ranged from 74.5 million to 76.7 million acres and averaged near 75.5 million acres.

At least one respected analytical firm last week came out with an even higher forecast for corn planted area and also raised its forecast for soybean plantings.

The favored status of corn was obvious in top-producing Iowa, where farmers indicated they would increase area from 2011 by 500,000 acres, or 4%, to 14.6 million acres, and would reduce soybean area by 550,000 acres, or 6%, to 8.8 million acres. Other significant changes included Minnesota with corn area up 600,000 acres and soybeans down 200,000 acres from 2011 and Nebraska with corn up 450,000 acres and soybeans down 200,000 acres.

But the “prize” went to North Dakota growers who indicated they would boost corn plantings from 2011 by 1.7 million acres, or 52%, to 3.4 million acres.

The key number offsetting the high corn planting number was the U.S.D.A.’s estimate of March 1 U.S. corn stocks in all positions of 6,009 million bus, which was about 150,000 bus below the average trade expectation and the lowest since 2004.

“This March 1 inventory estimate implies that corn consumption during the more recent winter quarter was very large or that earlier stock estimates for the current marketing year were too high,” Mr. Irwin said in farmdocDAILY. “Our view is that the latter explanation is more likely to be true given livestock inventories, the depressing effect of warm winter temperatures on feed use, ethanol production to date and strong basis levels.”

The U.S.D.A. March 1 corn and soybean estimates and recent forecast soybean production losses due to weather in South America, indicate both markets must move to prices that will ration old crop supplies, Mr. Irwin suggested.

Since the reports came out on March 30 old crop May corn futures rallied about 54c a bu, or 9%, through last Tuesday, with new crop December up about 21c, or 4%. Old crop May soybeans gained 61c a bu, or 5%, during the same period, with new crop November up 74c, or 6%.

“The market had sold off going into the reports,” Mr. Meyers noted. “That’s why the reaction was so strong.” He expects corn may lose acres to soybeans by the time planting is done, and that new crop corn prices will weaken.
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