Analysts now say the supply of corn may not be as critically low as once estimated. This could be due to lower feeding or perhaps an understated crop size in 2012, but the result is the same, a higher carryin for 2013. Corn prices tumbled on the news and dragged wheat prices down with them.
Corn contracts went limit down in late March on a bearish quarterly stocks report released by USDA. The March 28 estimate of 5.4 billion bushels in stocks was 370 million bushels higher than the expected trade guess of 5.03 billion bushels. Old crop corn futures dropped to $6.95, while new crop corn fell to $5.63.
According to Brian Basting, Advance Trading, Bloomington, Ill., the stocks number implies a low feed residual use from December through February or perhaps the 2012 corn crop was bigger than estimated. “But at face value, that number implies a much more comfortable corn carryout than what we thought. And that is weighing on wheat prices as well.”
Grain analyst Richard Brock said the grain stocks number implies a corn carryout of between 900 million and 1 billion bushels.
USDA’s Prospective Plantings survey indicated that U.S. corn growers intend to plant 97.3 million acres of corn in 2013, up slightly from last year and 6 percent higher than in 2011. If realized, this will represent the highest planted acreage in the United States since 1936 when an estimated 102 million acres were planted.
USDA’s corn acreage number was “right in line with trade guesses,” Basting said. “Soybean acreage, at 77.1 million acres, was a little lower than trade estimates.”
Basting said the United States “is still going to need a large corn crop this year, but at least for the time being, the market is becoming comfortable about some level of moderate carryout.”
According to USDA, Arkansas producers are expected to increase corn plantings by 41 percent over 2012, going from 710,000 acres to 1 million. Mississippi is expected to increase corn acres by 28 percent, from 820,000 acres to 1.05 million acres. Louisiana is projected to increase from 540,000 acres to 600,000 acres, an 11 percent, while Tennessee corn acres are expected to decline from 1.04 million acres to 970,000 acres.
Soybean planted area for 2013 is estimated at 77.1 million acres, down slightly from last year but the fourth highest on record, if realized. Compared with 2012, planted area is down across the Great Plains with the exception of North Dakota. Nebraska and Minnesota are expecting the largest declines compared with last year, while Illinois and North Dakota are expecting the largest increases.
The report was also bearish for wheat, noted Basting. “Another surprise was the jump in acreage for hard red spring wheat plantings to 12.7 million acres, which was above the average trade guess. We’re obviously still looking at some weather we may have to deal with, but it does set up the possibility of dealing with a larger crop. Overall, the plantings are a little negative.”
USDA estimated stocks for all-wheat at 1.234 billion bushels, which was higher than the average trade guess. “That implies that feed residual during December, January and February was lower than what the trade expected.”
On the other hand, “We are hearing that quite of wheat is being committed into feed rations over the last month because of the favorable economics of wheat relative to corn. As we move into summer, we may see some tremendous wheat feeding.”
On the other hand, “wheat is linked to corn,” Basting said. “The anticipation was that we would see substantial substitution of wheat into the feed ration this spring and summer. That still may happen, but the dynamics of the two crops have changed now, especially if the extremely tight old crop corn carryout doesn’t come to fruition. If that happens, it will drag wheat with it to the downside.”
According to USDA, sorghum growers intend to plant 7.62 million acres of sorghum for all purposes in 2013, a 22 percent jump from last year. Kansas and Texas are the leading sorghum states and account for 77 percent of the expected U.S. acreage. As of March 24, Texas growers had planted 33 percent of their crop, which is 3 percentage points ahead of last year.
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