The USDA June acreage report was particularly bullish for corn. USDA estimated the US corn planted area at 92.0 mln acres, 5.0 below the March estimate and 3.2 below the market average estimate. This translates to approximately 822 mbu less corn production, assuming the June yield estimate and harvest ratio. This would drastically lower the US corn ending stocks by 25% to 2.5 billion bushels, assuming no rationing on the corn demand. While 2.5 billion bushels remain an abundant stocks number, corn was underpriced at the pre-rally level of $3.2/BU. The last time when new crop corn stocks reached as high as 2.5 billion bushels was in May 2019, while CBOT corn traded as low as $3.4/BU.
The lower corn acreage estimate from March was scarcely switched to beans, as the bean+corn pool was sharply lowered from March and far below the lower end of the market estimate range, leading to a price rally across the board. USDA raised bean plantings by 325 k acres from March, below the average market estimate by 939 k acres. US soybean stocks will remain lower YoY, with the new acreage added.
Furthermore, US all wheat plantings came in 0.5 mln acres below the market estimate, at a multi-year low, led by both winter wheat and spring wheat.
The bullish (low) new crop acreage overshadowed the bearish (high) June 1 stock estimates for corn and wheat. Corn came in 234 mbu above the market estimate and 22 mbu higher YoY, while wheat was 65 mbu above the market estimate, despite being lower 36 mbu YoY. While the fuel ethanol demand was widely publicized, US corn feed demand in Q2 were weaker than expected, despite record hogs inventories and backlog in the supply chain as slaughter pace slowed due to the coronavirus.
The on-farm and off-farm break-down of the corn stocks estimate further indicated that the lower quarterly disappearance YoY was more attributed to the sharply lower farmer selling YoY in Mar-May, while off-farm stocks reduction QoQ matched that of last year. In fact, US corn farmer selling in Dec-Feb was ahead of last year’s pace, and that pace has since been reversed in Mar-May, perhaps driven by the low farm prices following the coronavirus outbreak.
The low farm prices have also led to slower bean farmer selling in Mar-May YoY, following a similarly poor Dec-Feb selling window. The dragging trade war and coronavirus have generally kept the farmers in the back seat this season, as on farm stocks comprised of 46% of the June 1 soybean stocks, compared to only 41% a year ago. Overall soybean June 1 stocks came in at 1,386 mbu, largely in line with average market estimate and 397 mbu lower YoY.