The United States Department of Agriculture decided to kick off the 2019 crop season with a bang this year, releasing both quarterly grain stocks and initial planting intentions on March 29th. It wasn’t great news for the market, despite the slide going into report day. The aftermath of the report pushed corn to within a penny and a half of the December contract low seen last summer, so Monday is a big test. Soybeans finished about mid-range for the day and for the range going back to last summer, posing a challenge to further rallies. Spring wheat closed in on lows prior to the report, and despite reduced intended acreage and the threat of further reductions from a slow planting start, is not showing much promise at this point.
|March 1 Stocks||Average Trade Estimate||March 1, 2018 Stocks|
The obvious problem here is that all three grains came in above expectations. The biggest surprise was in corn with 270 million bushels MORE than the trade was expecting. Much of that reflects the slowing export pace after a stellar fall, but remember that the flooding in Nebraska and Iowa has caused further slowdowns in ethanol grind. That lost demand cannot really be made up. Lost capacity is lost because we were operating close to full capacity prior to the flooding issue and they cannot get that operating time back, even if the margins work to blend. The slowdown is not really factored in to this since it is “as of” March 1. The upside surprise infers a carryout number close to two billion bushels again when we get WASDE in April, and possible slightly higher. The good news, at least for our customers, is that the early fall sales of corn were largely off the PNW, so North Dakota did see a decline in stocks from last year at this time, total. On farm stocks, however, are higher with 180 million bushels stored on farm on March 1 compared to 165 million bushels last year at this time. South Dakota has a very similar situation. In Minnesota, total stocks are down, but so are both on and off farm storage, so it was true draw down aided by the shorter crop compared to 2018 in the South Central to Southwestern parts of the state. Wisconsin is pretty flat across the board with a slight increase in total stocks compared to last year.
Soybeans came in 33 million bushels higher than expected, which is not massive but a problem given the huge carryout. If anything, it probably does not burden futures as they exist now, but it does put more pressure on the U.S. to get some sort of movement on Chinese demand sooner rather than later (at least from a political standpoint). On a state by state basis, there is a big problem for North Dakota. Total soybeans stocks in the state are up 43.7 million bushels compared to the year prior (55%). Soybeans stored on farm is up 30 million bushels (77%) while off farm stored bushels are up 13.7 million bushels (34%). Bushels in South Dakota are up 62.47 million bushels (66%) with on farm stored bushels more than doubled compared to the year before. Off farm is up around 20 million bushels. Minnesota is sitting on 50 million bushels more (roughly 25% more than the year prior) with the increase primarily on farm. Wisconsin is up 16 million bushels but the bulk of that increase in off farm. Further, estimates by AgroConsult late March boosted Brazil’s soybean production estimate back up to 118 mmt compared to 116.4 mmt last month, saying the move was supported by the results of their crop tour through the country.
Wheat was not as numerically large of a shocker, but more impactful since the marketing year ends June 1. Exports during the spring usually are not great, and Spring wheat in particular has struggled. In North Dakota totals stocks are up 77 million bushels or 48.7% compared to the year prior. On farm stored is up 64 million bushels (up 70% on the year) but off farm stored bushels also increased. South Dakota, which is more of a mix of classes is up 8 million bushels most of which is stored on farm.
Some notes here: The weather has a lot to say in this. This survey is taken the first two weeks of March and the weather since then is likely to change this. Barring a major shift in pattern, the trade will view this as a high mark on corn and a low mark on beans, although that’s fluid with the situation.
|Ag Outlook (Feb)||92||85||47|
|USDA Final 2018||89.129||89.196||47.8|
|USDA 2018 Final||47.8||32.535||13.2||2.065|
Plantings by state for our trade area:
(By acres in millions.)
Now there is probably a lot of discussion on the accuracy of that North Dakota corn number, but remember we are dealing with smaller numbers, so percentages can swing a lot. Total, we are talking about a million acres and in aggregate over the state I cannot say that would be out of line, although significant. The bigger question is where did those acres come from? Obviously from beans and some from wheat and between those two you are already up to about 600,000. The rest likely came from specialties. Not sure how much of the durum will go to corn given the location of the durum acres in North Dakota, but those intentions are down 350,000 acres. Sunflower and barley are both expected to gain area, as is flax (note on anyone dealing with flax, the increase is massive and I hope growers have a contract in place). Dry edibles lost 35,000 acres, chickpeas 39,000, lentils 25,000, dry edible peas 110,000. It is notable that in terms of total principal crop acres, North Dakota is the only state adding acres. Again, planting season will have a lot to do with how much actually goes in.
In the major corn and soybean growing states of Iowa, Illinois, and Indiana all three are expecting to lose soybean acres but in aggregate it is only 1.15 million acres. Corn acres in those three states is expected to rise 700,000.
It looks like an interesting year, especially when you consider the weather we are already having. That said, do not take the planting numbers too seriously. These are intentions and they always change by June. However, as I mentioned above, it is likely a high for corn intentions and a low for soybeans unless something changes.
If you have any questions, please contact your loan officer or Rob, Hoot or myself. Here is to a safe 2019 planting season!