Welch on Grain: USDA Raises Corn Planted, Harvested Acres

©Debra L Ferguson Stock Photography

Market Situation

WASDE. U.S. corn ending stocks for the 2017/18 marketing year were projected higher in today’s World Agricultural Supply and Demand Estimates. USDA raised planted and harvested acres by about a million based on the June Acreage report and left the yield estimate unchanged at 170.7 bushels per acre.

That added 190 million bushels to the supply side of the equation in addition to an upward revision in beginning stocks of 75 million bushels with a lower feed use estimate from last year.

The only change to the use categories was again in feed, up 50 million bushels. The net impact was an increase in ending stocks of 215 million bushels, back up to 2.325 billion for the year.

The season average farm price estimate fell 10 cents to $3.30 which would result in a PLC payment of 40 cents per bushel.

The changes in the U.S. corn supply and demand estimates drove adjustments in the world corn balance sheet with beginning stocks up 2.92 mmt (115 mil bu), production up 5.04 mmt (198 mil bu), use up 1.48 mmt (58 mil bu), and ending stocks up 6.48 mmt (255 mil bu). This puts estimated days of use on hand at the end of the marketing year up by 2 days compared to June, a 68.91 day supply.

Acreage. U.S. corn acres came in about 1 million acres above the March Intentions survey and trader expectations. There was no surprise in soybeans but wheat was below the lowest of the pre-report trade guesses and the March number with the decline in spring wheat acres.

Grain Stocks. Corn stocks reported in all positions on June 1 were higher than the trade expected as well, 5.225 billion bushels versus an average trade guess of 5.123 billion. Corn prices held firm last week in response to higher than expected acres and stocks in the face of a hotter than normal weather outlook that could lower yield prospects. As noted above, USDA did not lower the yield estimate in today’s report.

Crop Progress. The U.S. corn crop condition index slipped 6 points this week to 365. No changes were made to the excellent category but good fell 3 while very poor, poor, and fair all gained one. The average index for this week of the growing season is 370.

Of major corn producing states, those with ratings of poor and very poor combined in double digits are Indiana 17%, North Dakota 16%, and South Dakota 22%.

Grain Commentary

The Dakotas continue as the major corn production areas affected by drought. Compared to a month ago, a smaller total area of corn in each state is in some stage of drought condition, but the intensity has increased.

Outside Markets. The June jobs report showed a 222,000 increase in non-farm payrolls but a small uptick in the civilian unemployment rate from 4.3% to 4.4%. The overall size of the workforce increased by 361,000 but the number employed only increased by 245,000. The number of persons unemployed increased by 116,000.

The labor participation rate was higher, from 62.7% to 62.8%. The broader measure of unemployment, U6, which includes persons working part-time but seeking full-time positions, was up from 8.4% in May to 8.6%.

In her semi-annual report to Congress, Fed Chair Janet Yellen today noted the strength of the job market, in particular the labor force participation rate. That it is holding steady to showing slight improvement is a positive sign for the U.S. economy given current demographics of an aging population and increasing number of baby-boomers leaving the job market.

She also noted that the Federal Open Market Committee expects the growth of the economy to “…warrant gradual increases in the federal funds rate over time to achieve and maintain maximum employment and stable prices” and that “…gradual rate hikes are likely to be appropriate over the next few years.”

Marketing Strategies

Seasonality. The seasonal price pattern for the December corn contract shows that prices tend to fall off after we know more about acres (June 30 Acreage report) and weather during the precipitation and temperature sensitive silking and tasseling stages (July). My marketing plan calls for having 40 to 60% of the 2017 crop priced before the end of July.

2017 Feed Grain Marketing Plan. Even though warmer than normal weather is still a concern for this year’s corn crop, the market closed lower today when USDA held its yield estimate steady at 170.7 bushels per acre. My marketing plan called for getting another 20% of the 2017 corn crop priced before the end of July.

That signal came today at 411 when the price fell below the 4-day moving average. I anticipate pricing another 20% around the time of the August crop report when yield prospects will be based on field observations.

Upcoming Reports/Events.
July 21 – Cattle on Feed
August 10 – Crop Production and WASDE
September 18-20 – Master Marketer, Castroville, Texas

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