USDA reports | Corn inventories exceed projections as U.S. farmers prepare for possible record-setting crop
WASHINGTON, D.C. (Reuters) — Grain prices fell recently on a report that showed U.S. corn inventories were larger than expected as of March 1.
The news eased a near-term supply crunch ahead of a potentially record-setting crop that will be planted in coming weeks.
In a pair of reports issued March 28, the U.S. Department of Agriculture said the corn stockpile halfway through the marketing year was eight percent larger than traders expected. Meanwhile, corn plantings would be the largest since 1936 at 97.3 million acres, although roughly in line with expectations.
In Chicago, old crop corn futures prices plummeted on the bearish data, dropping their 40 cent per bushel daily limit on the day of the report and another 53 cents April 1, when the trading limit was expanded.
Soybeans fell by nearly four percent and wheat by six percent.
U.S. corn prices had been at record highs this season following the worst drought since 1934.
“The higher prices really did more damage to demand than people wanted to believe,” said Sterling Smith, futures specialist at Citigroup, referring to the corn stockpile.
Plantings of soybeans were projected to be smaller than expected at 77.126 million acres, perhaps the only bullish surprise in the highly anticipated reports.
Some 5.399 billion bu. of corn were in U.S. bins on March 1, down 10 percent from one year ago, according to the USDA. The figure was well above even the highest estimate in a recent Reuters survey of traders and analysts.
“The corn stocks were off the charts bearish,” said Charlie Sernatinger of ABN AMRO.
Corn and soybean stocks were larger than expected, but three years of declining production have depleted supplies and leave little leeway for a bad harvest. March 1 stocks for both crops were the smallest for that date since 2004.
The USDA report showed that corn disappearance for the December-February quarter tumbled 27 percent from a year earlier. USDA chief economist Joe Glauber said the figures implied the smallest corn consumption for that period since 2002.
“We’re going to be looking at that,” Glauber told USDA’s radio service.
Rich Nelson, research director at Allendale Inc., said second quarter feed use must have crumbled.
“The trade had too-high estimates for feed use because of the first quarter numbers. The first-quarter use was artificially high due to the early August harvest.”
Another reason for falling corn demand has been slower ethanol production, now running 10 percent below the 13.8 billion gallon federal target for 2013.
“We’ve seen a bit of slowness in the ethanol production and that allowed corn stocks to grow a little bit along with the really sloppy and slow export sales,” Smith said.
Soybean stocks of 999 million bu. were seven percent larger than the average trade guess, and also topped even the most bearish forecast.
“The surprising March 1 soybean stocks implies the 2012 U.S. soybean crop was understated by 35 to 50 million bu.,” said Terry Reilly of Futures International.
Wheat stocks, at 1.234 billion bu., were five percent larger than expected.
Farmers intend to plant 97.282 million acres of corn, their most widely grown and most valuable crop, the USDA said.
Plantings would be the highest since 1936 and would result in a record-setting crop of 14.6 billion bu., assuming normal weather and yields, according to Reuters calculations.
Soybean plantings of 77.1 million acres would be down fractionally from last year and two percent below trade expectations. A record crop of 3.4 billion bu. is possible with normal weather and yields.
Wheat growers indicated sowings of 56.4 million acres, up three percent from last year and in line with expectations.
Persistent drought in the central and southern Plains was expected to bring lower yields and a smaller crop than last year. A cold spell March 24-25 may have damaged wheat in parts of Kansas, Oklahoma, Texas and Colorado.
The wheat crop could total 2.1 billion bu., based on USDA projections of yields and abandonment.
Overall, farmers intend to plant roughly the same amount of land to the eight major crops as last year. Corn and soybean sowings will be little changed, while cotton loses ground to sorghum.
Some analysts believe final soybean plantings will be larger than growers indicate because of cold weather as the planting season nears. Farmers switch to soybeans when they feel the ideal time is passing to plant corn.