April 4, 2005
WHAT WAS LEARNED FROM USDA REPORTS?
The USDA's quarterly Grain Stocks and annual
Prospective Plantings reports released on March 31 contained
important information for the corn and soybean markets.
At 1.381 billion bushels, the estimate of March 1, 2005 soybean
stocks was about 35 million less than expected based on the
estimate of December 1, 2004 stocks and available consumption
data for the period December 2004 through February 2005. The
estimate implies a very large "residual" use of
soybeans during the second quarter of the marketing year and
on the surface suggests that the 2004 crop was actually smaller
than estimated. If that is correct, year ending stocks will
be smaller than currently projected by the USDA. Those stocks
will still likely exceed 350 million bushels, well above the
200 million generally considered as adequate. The June Grain
Stocks report will provide more information relatively to
the size of the 2004 crop. In the meantime, the smaller than
expected March 1 inventory, along with a drought reduced Brazilian
crop, and relatively strong U.S. exports should provide a
little support for soybean prices.
At 6.754 billion bushels, March 1, 2005 corn stocks were
about 30 million bushels larger than the average trade guess.
The large stocks figure implies that feed and residual use
of corn during the first half o the 20054-05 marketing year
totaled 3.764 billion bushels, only 0.5 percent more than
used during the first half of the 2003-04 marketing year.
For the year, the USDA has forecast a 4.8 percent increase.
That is not likely to occur and implies that year ending stocks
could exceed the current USDA projection of 2.055 billion
bushels by at least 200 million bushels, even if the pace
of exports accelerates somewhat. Year ending stocks now look
to be the largest in 17 years and should serve to keep some
pressure on prices in the near term.
The Prospective Plantings report indicated that U.S. producers
intend to plant 81.413 million acres of corn in 2005, only
483,000 more than planted in 2004. Producers in most of the
largest corn producing states intend to plant more corn than
in 2004. The exceptions are the intentions to reduce acreage
by 200,000 (17 percent) in North Dakota and 250,000 (5 percent)
in South Dakota. Acreage is scheduled to increase by 300,000
(10 percent) in Kansas. Modest increases are also planned
in Illinois, Indiana, and Iowa.
Corn planting intentions are about 1 million acres below
market expectations. In addition, planting intentions are
down by 86,000 acres for sorghum and 553,000 acres for barley.
Intentions for oat seedings (of which less than half typically
is harvested for grain) are up 182,000 acres. Intentions for
all feed grains are about equal to last year's plantings.
Soybean producers reported intentions to plant 73.91 million
acres in 2005, about 1.3 million below last year's acreage.
Modest declines are planned in a number of states including
Illinois (2.5 percent) and Indiana (2.7 percent). Larger declines
are planned in some southern states, including Louisiana (23
percent) and Georgia (21 percent). A decline of 500,000 acres
(13 percent) is planned in North Dakota. Small increases are
planned in Iowa, Kansas, Kentucky, and Ohio. In total, planting
intentions are down 300,000 in western growing areas, 400,000
in the eastern corn belt, and about 530,000 in southern growing
The planned reduction in soybean acreage is more than offset
by intentions to increase acreage of other oilseeds. Intentions
are up 396,000 acres (76 percent) for flaxseed, 182,000 (21
percent) for canola, and 877,000 acres (47 percent) for sunflowers.
In addition, planting intentions for peanuts exceed the 2004
acreage by 167,000, or 12 percent. It appears that producers
have responded to the high vegetable oil prices of the past
six months. Intentions for all oilseeds, including soybeans,
exceeds last year's plantings by 324,000 acres.
For wheat, producers reduced winter wheat acreage by 1.737
million, but intend to increase durum acreage by 47,000 and
other spring wheat by 600,000 acres. Acreage of all classes
of wheat is expected to total about 58.6 million acres, down
by nearly 1.1 million acres from last year's seedings and
at the lowest level in 33 years. Intended acreage is nearly
30 million less than the peak acreage of 1981.
With trend yields in 2005, the intended acreage for all crops
would result in adequate supplies for the 2005-06 marketing
years. Stocks would remain relatively high for corn and soybeans
for another year. The market will watch the development of
the U.S. crop for any indication of deviation from trend yield.
Soybean rust will garner special attention. In addition, the
development of the world wheat crop and the Chinese corn crop
will be monitored to judge potential export demand for U.S.
crops. Production of wheat and feed grains outside the U.S.
is generally expected to decline in 2005-06 and some dry conditions
are being reported in China. Recent price volatility may continue
through the growing season, providing opportunities to price
additional quantities of the 2005 crops.
Issued by Darrel Good
University of Illinois