USDA to Drop Crop Acreage Due to Wet Weather?

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The following is an an article from DTN/The Progressive Farmer, A Telvent Brand:

Producers and grain-market watchers may get a better idea of how many U.S. crop acres were affected by wet weather this spring and early summer when USDA releases its June Planted Acreage report Wednesday morning.

Pre-report acreage estimates have U.S. corn plantings pegged at 89.23 million acres, which, if realized, would be the third largest acreage since 1945, trailing that year’s 89.36 ma and the 93.53 ma seeded in 2007.

However, given yield improvements over time (not discussed in USDA’s June 30 Planted Acreage report), such an increase could produce record-large production of 13.44 bb, using USDA’s current average yield estimate of 163.5 bpa. There is an outside chance that corn planted acres could come in above 90 million, which could be viewed as bearish. Otherwise, the report should be viewed as neutral to bearish for corn.

The average pre-report estimate of 78.18 ma of soybeans would be a record, outdistancing the 77.45 ma reported in 2009. However, it will be interesting to see if there is a weather adjustment made due to the wet weather seen over the latter part of the spring and early summer. Since the 78.18 million would be only a minor increase from the March 31 report, it should create only a minor change in total production. Therefore, if the June report comes in close to this estimate, it should be viewed as neutral. A lower number, again due to weather, could be viewed as bullish.

Spring wheat acreage is expected to decline slightly, which could be bullish if not already built into the market, though most traders will be focusing on the corn and soybean numbers. One thing that could garner some attention is an expected increase in cotton acreage. If realized, the 10.75 ma would be the largest since the 10.76 ma planted in 2007.


QUARTERLY STOCKS

Pre-report estimates for corn stocks on hand at the end of May average just under 4.6 billion bushels, and, if realized, would be the largest third-quarter stocks figure on record. It would also indicate the largest quarterly demand for corn at almost 21 percent of total supplies since the 1995-1996 marketing year. However, if USDA’s quarterly stocks number comes in close to the pre-report estimate, the market would still need to see record fourth-quarter demand of over 20 percent of total beginning supplies (14.8 bb) to fall to the projected ending stocks figure of 1.6 bb.

Soybean quarterly stocks are expected to come in at 594 mb, indicating demand of 19.2 percent of total beginning supplies (3.51 bb). This would be a solid drop off from third-quarter demand seen the last two years and running behind the five-year average of 21.2 percent. However, longer term, the market would only need to see fourth-quarter demand of 11.6 percent (well below the average of 14.6 percent) to reach USDA’s ending stocks projection of 185 mb.

The average pre-report estimate for all-wheat ending stocks is 940 mb. This would be a 10-mb increase over USDA’s 2009-2010 ending stocks estimate of 930 mb from the June Supply and Demand report. If the quarterly stocks number comes in at or above the pre-report average estimate, it would indicate U.S. ending stocks for 2010-2011 could be more than 1 billion bushels. From a demand point of view, 940 mb would reflect quarterly demand of 13.8 percent of total beginning supplies (2.988 bb), well below the five-year average of 15 percent but ahead of the 13.1 percent seen in 2008-2009.

© Copyright 2010 DTN/The Progressive Farmer, A Telvent Brand. All rights reserved.

Posted with DTN Permission by Haylie Shipp.

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