2019/20 US S&Ds May Rise, But US Corn Plantings Need A Major Haircut

Market Analysis

The US planting intentions got the trade’s initial attention last week after 2020’s producer survey showed corn plantings higher and soybean lower than the trade ideas. The USDA won’t utilize this planting data until its first 2020/21 US and World supply/demand outlooks are released on May 10. Its importance however justifies a balance sheet creation utilizing Ag Forum trends. The latest quarterly stocks data—plus our domestic processing and US export trends —were utilized to determine if April 9 US old-crop corn, soybean (SOYB) & wheat (WEAT) balance sheets need changes.

Corn’s (CORN) March 1 stocks were 172 million bu. below expectations. This suggests a possible 2019 overestimate of the crop, but this will be handled by upping corn’s feed & residual by 175 million bu. to 5.7 billion. The Russian/Saudi crude oil (OIL) splat & dropping US gasoline demand on expanding staying at home orders has closed 25-30% of US ethanol plants. This suggests a 200 million bu cut in this demand. US export sales have picked up, but still remain behind their seasonal pace suggesting another 100 million bu. drop in this demand. Overall, corn’s 19/20 carryover could rise to 2.027 billion. This stock level and 2020’s 97 million planting intentions suggests a disastrous 3.23 billion bu. ending stocks, highest since 1987/88. A 2.5 to 3 million minimal acre shift to other crops is needed to prevent $3.00 or lower prices for the next 20-24 months.

The USDA’s 2.253 billion bu March stocks sliced beans current residual level to 28 million, (down 48 million & lowest for 3/1 since 1983) suggests 2019 harvest maybe underestimated. Despite a change in Feb’s crush, US processing remains on a record 1st half record pace. This suggests a 15 million rise in this demand while exports maybe sliced by this amount leaving 2019/20 stocks at 425 Mil.

Wheat’s March 1 stocks suggest the US wheat feed demand is on target. Even with a seasonal up in humanitarian aid, this crop’s exports maybe cut 20 million resulting in a rise of US stocks to 960 million bu. 

What’s Ahead

A shift in acreages away from corn to beans, wheat and other small grains won’t open up corn price potential like last summer (only weather will do), but these other crops have some room before supplies swamp their demand. Improving US coronavirus news & a settlement in OPEC’s crude oil fight maybe the biggest factors near-term. Look to resume grain sales near recent highs.