Today USDA gave us quarterly grain stocks and planted acreage. Going into the report, it was expected that the stocks number would be the most important number shown. After the March report showing stocks so much higher than expectations, many wondered if USDA was going to make an adjustment on this report and show stocks well below expectations. On the acreage estimate, the June acreage number is usually very close to the final acreage number. It is a massive survey and undertaking. In a normal year, acreage is well known by the time the surveys come back in mid June. As we all know, this is not a normal year and USDA was already walking back expectations for the accuracy of the acreage estimate before the report was released by indicating the need for resurveys. The June acreage estimate is usually called the Planted acreage report but this year it was still intended acreage as planting is so far behind.
The major surprise here is that USDAs corn estimate of corn acreage was 91.7 million acres which is only around a million acres less than reported as intended in March and more than 5 million acres higher than what the market was expecting (also up 2.5 million acres from 2018 total corn). At one point the corn market was locked down the limit of 25 cents but came back to close down 19 cents on the December contract. Before the report, we thought the market would be able to dismiss a big acreage number since the planting was so late, but this was such a big surprise the market had a hard time completely dismissing it.
By USDA’s own admission, this is very much still an estimate of what was intended to be planted rather than a count of what is actually planted as it is in most years. In late May/early June when these surveys were being compiled, corn was rallying, beans were not moving and the trade talks with China had collapsed. It is completely rational that everyone still intended to plant as much corn as they could and minimize bean acres. At the time of the survey, USDA estimates 16.7% of intended corn was still unplanted. That is 15.31 million acres and is 10 times as much as is still unplanted in a normal year. The June acreage report is usually very close to final corn acres because there is usually only between 1.5 and 2% of the intended corn left to plant when the survey is conducted which is not a lot of room for error compared to this year’s 16.7% left to plant. On this survey, the USDA does not explicitly ask respondents to account for prevent plant acres. The survey was designed before it became clear how bad this planting weather actually was and therefore it was not designed to accurately capture the extent of prevent plant. USDA’s announcement of an unprecedented resurvey at the same time they released these numbers is them saying not to take these numbers at face value!!
USDA actually gave us a fairly bullish surprise on corn stocks. Their stocks estimate was around 130 million bushels less than trade expectations. The market reacted first to the stocks and traded up 15 cents before the acreage surprise weighed heavier.
USDA also gave us a fairly bullish surprise on soybean stocks and acreage. At the time of the survey, 41% of soybeans intended acres were still unplanted (32.97 million acres). The 80 million acreage estimate USDA gave us tightens up the balance sheet and then if you add on prevent plant acres and yield reduction due to late planting, you can create a story in beans too. If we make progress on trade with China that will just add fuel to the first.
In summary, this is not the report that we wanted to see and the market action today is a bit discouraging. But USDA’s immediate announcement of a resurvey and upfront admission of the limitations of the surveys in this very unique year will take a bit longer for the market to digest. Be looking for another market update early next week as there is more to discuss on this report as we see the longer reaction by the market.
I am also repeating for emphasis:
USDA’s announcement of an unprecedented resurvey at the same time they released these numbers is them saying not to take these numbers at face value!!