February 14, 2012

 

 

The USDA on Monday (Feb 13) forecast record US corn acres this spring at 94 million, the most since 1944 and near trade expectations for 94.2 million.

 

The baseline projections, based on data in November and which will be updated at the USDA's Outlook conference on Feb 23 and 24 with more current statistics, put corn ending stocks next summer at 1.6 billion bushels - double the 801 million this year.

 

Corn stocks, the smallest in 16 years this year, will swell to the largest in two years in the 2012/13 season (Sept/Aug).

 

A Reuters poll of 24 analysts' had pegged the area at 94.2 million.

 

USDA's forecast corn area fell short of the 95.475 million planted in 1944, 68 years ago.

 

USDA forecast the amount of corn for feed at 5.225 billion bushels, up from 4.6 billion this year, corn for ethanol was trimmed to 4.950 billion from 5.0 billion and exports were increased to 1.875 billion bushels from 1.7 billion this year.

 

The government lowered its average farm corn price to US$5.00 per bushel for next year compared with US$6.20 this season.

 

USDA cited a record 14.235 billion bushel corn crop, above the previous record 13.1 billion and pegged the yield per acre at 164.0 bushels, above last year's 147.2 bushels per acre. USDA forecast soy plantings at 74.0 million and a crop of 3.215 billion bushels, the third largest on record.

 

The baseline report had little impact on grain futures at the Chicago Board of Trade (CBOT).

 

Last year, the baseline projections took many grain experts by surprise when active selling tumbled corn futures at the CBOT by 16 cents, or 2.3 %, over two days, and by 50 cents, or 3.5 percent, for soy.

 

An analysis of USDA's annual baseline projections for corn acreage over the past decade showed the forecasts topping the department's estimates from the Outlook conference just once, while coming in lower six times.

 

For soy, the baseline projections topped the Outlook estimates three times and came in below five times.

 

Last year, the baseline projections for corn and soy acres matched those from the Outlook's at 92 million acres and 78 million acres, respectively.

 

The USDA's acreage estimates are updated more definitively in its March 30 planting intentions report, which is based on surveys done with farmers.

 

Analysts said high profitability of growing crops this year is going to draw more land out of the conservation reserve programme, a government scheme that pays farmers not to plant crops in return for a cash payment.

 

USDA projected plantings of the eight major crops at 251.2 million acres compared with 249.3 million last year.

 

Wheat plantings were pegged at 56.5 million, up from 54.4 million last year.

 

The USDA last summer said seven million acres of corn, soy and spring wheat were not planted because of a cold and wet spring. All of that land is expected to be put back into production this year.

 

A big a jump in corn output, assuming exports, feed usage and use for ethanol remains stable, would replenish US corn stocks that are projected to end this marketing year at a 16 year low. This rapid buildup in corn stocks could add significant pressure on corn prices.

 

The US corn supply has been drawn down even further than expected earlier in the early because of a drought in Argentina, the world's second-largest corn exporter after the US.

 

Corn prices are currently 20% below the record high of US$7.99-3/4 hit last summer and 10% below a year ago. However, the price of corn remains 40% above the peak in 2009, a year of record yields and production.

 

Therefore, the current price is being viewed by some at a lofty level considering the potential rush of acreage and possible record production this year.

 

Despite the surprise impact of the baseline projections on the market last year, some traders are convinced the data will be uneventful this time around.

 

"I have no interest in the baseline numbers. They have little value for 2012 acreage forecasts and very little accuracy. I am much more interested in USDA's personal thoughts at the February 23-24 outlook conference," said Rich Nelson, director of research at advisory firm Allendale Inc.