July 1, 2008

 

USDA's latest acreage report not comprehensive, but important

Monday's acreage report from the USDA still leaves plenty of "gray areas" when looking at corn and soy planted area, but it at least gives end-users a base to work from, analysts said.

 

"A lot of people are going to downplay this report saying there are too many loopholes, and a lot of gray areas, but what's extremely important to remember is this is our base," said Jim Bower, president of Bower Trading.

 

The USDA released its annual acreage and third quarter grain stocks reports on Monday which were looked at with more scrutiny than usual because of the Midwestern floods this spring.

 

Corn acreage is 87.327 million acres compared to analysts' estimates of 85.321 million. This compares to the 86.014 million from the March 31 Prospective Plantings report. In 2007 seedings were 93.6 million.

 

Soy acreage is 74.533 million acres compared to analysts' estimates of 74.203 million. This compares to the 74.793 million from the March 31 Prospective Plantings report. In 2007 seedings were 63.631 million.

 

The market is taking these numbers with a dose of caution because of the Midwestern floods earlier this month. Usually USDA surveys farmers on how much they planted on June 1, but flooding occurred afterward, making some of the surveys dated. USDA's true acreage tally would not be available until August as it will resurvey growers on planted area in July.

 

Dan Cekander, director of grain research Newedge USA said the increase in acreage abandonment suggests that USDA is trying to take into account that some fields will be zeroed out because of the floods. Harvest area is down 9 percent from the planted estimate, with 8.4 million unlikely to produce corn versus 7.2 million estimated in March.

 

The USDA also released third-quarter grain stocks data, outlining usage. Both analysts noted rationing of corn by livestock producers finally kicked in the third quarter, which helped plump up stocks.

 

Third-quarter grain stocks for corn are estimated at 4.028 billion bushels, compared to the trade estimate of 3.925 billion bushels. A year ago grain stocks were 3.533 billion. In March stocks were 6.859 billion bushels.

 

Feed usage was up 12-14 percent in the first and second quarter as prices were cheaper relative to what they are now. In the third quarter, as prices moved up, feed usage moved down 3.3 percent, Cekander said.

 

With corn prices rising, end-users and procure managers have been under pressure to keep costs low. The higher acreage figure and grain stocks will give a little bit of breathing room, said Bower. Cekander said livestock feeders and others who are looking to buy corn on breaks will have the opportunity to do so and he sees the lower US$7 range for CBOT corn a good buy.

 

USDA forecast on soy stocks was bad news for end-users however. The report estimates a 38-percent drop.

 

Third-quarter grain stocks for soys are estimated at 676 million bushels, compared to the trade estimate of 669 million bushels. A year ago soy stocks were 1.092 billion and in March stocks were 1.428 billion.

 

Soy ending stocks will remain tight, Cekander said.