On March 31, 2008, USDA released its Prospective Plantings and Quarterly Grain Stocks reports.This was one of the most anticipated USDA reports ever, due to the strong grain prices in recent months and the fairly tight grain stocks that currently exist.Typically, these late March-USDA reports are very critical to farm operators and grain traders because these reports tend to have a high impact on grain market prices in the spring and early summer. This is the time of the year when many farm operators try to sell remaining grain inventories from the previous growing season, as well as look for opportunities to forward price a portion of the anticipated crop for the current year. In a majority of years, corn and soybean prices usually reach their peak price in the spring months.
Following are the key items from the March 31st Reports:
Corn – Indicated corn planting acres of just over 86 million acres for 2008 is down from 93.6 million acres in 2007, but is still higher than 2006, when 78.3 million acres of corn were planted in the U.S. The corn stocks on March 1, 2008 were listed at 6.86 billion bushels, which compares to 6.07 billion bushels on March 1, 2007, and 13 billion bushels in 2006.
Soybeans – Indicated soybean planting acres of 74.8 million acres in 2008 is up considerably from the 63.6 million acres of soybeans in 2007, and is comparable to the 75.5 million acres of soybeans planted in 2006. Soybean stocks on March 1, 2008 were listed at 1.43 billion bushels, which compares to 1.79 billion bushels on March 1, 2007, and 1.67 billion bushels on March 1, 2006.
Wheat --- Indicated total wheat plantings for 2008 of 63.8 million acres is up from 60.4 million acres in 2007, and is significantly higher than the 57.3 million acres of wheat planted in 2006. The wheat stocks on March 1, 2008, were listed at 710 million bushels, compared to 857 million bushels on March 1, 2007.
Cotton --- Indicated cotton plantings of 9.4 million acres for 2008, compared to 10.8 million acres in 2007, and 15.3 million acres of cotton planted in 2006.
The state-by-state Prospective Plantings report for 2008 is also rather interesting. In Minnesota, growers are expected to plant 7.6 million acres of corn in 2008, which is down from 8.4 million acres in 2007, but higher than the 7.3 million acres of corn in 2006. Minnesota farmers are expected to plant 7.1 million acres of soybeans in 2008, compared to 6.3 million acres of soybeans in 2007, and 7.3 million acres in 2006. Prospective plantings for 2008 in Iowa, Illinois and Indiana, showed a decrease of 5-12% in the intended corn acreage compared to 2007, with a planned increase in 2008 soybean acreage of 7-15% compared to 2007.
Overall, the biggest surprise in the March 31 USDA reports was not that the expected corn acreage decreased and the expected soybean acreage increased for 2008, but the level of the expected decrease in corn acreage and increase in soybean acreage from a year earlier. Nationwide, corn plantings for 2008 are expected to decrease by 8% compared to 2007 corn acreage, and the 2008 soybean acreage is expected to increase by 18% compared to 2007. The big factors now will be if there are any delays in spring planting in the Midwest – which could lead to a switch from corn acres to more soybean acres – and how USDA projects the average corn and soybean yields nationwide as the growing season progresses. Some experts are projecting a better-than-average chance of a drought in 2008 in some portions of the major crop-growing regions of the U.S.
Grain Markets
The immediate reaction to the March 31 USDA reports for soybeans on the Chicago Board of Trade (CBOT) was swift and very negative on Monday, March 31, with soybean futures prices down the limit of 70¢/bu. on all nearby months through November 2008, as well as all trading months in 2009 and 2010. That one-day market difference in soybean futures with average soybean yields lowers the estimated gross income for soybeans in 2008, 2009 and 2010 by about $30-$35/acre. The CBOT cash corn futures increased by just over 6¢/bu. on March 31, while December 2008 corn futures were up 4¢/bu. Wheat futures were down close to the trading limit of 60¢/bu. for nearly all trading months. It will be interesting to watch the grain markets in the coming days and weeks to see if weakness in the soybean and wheat markets continue, and to watch for any shifts from the intended 2008 crop acreages, compared to the March 1 estimates, as a result of any potential spring planting delays across the Midwest and plains states.
Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at kent.thiesse@minnstarbank.com.