The USDA issued their quarterly March 1 stocks report and first
seasonal Planting Intentions Report which outlines spring planting
intentions for the U.S. farmer.
Acreage Estimates (2013/14):
Corn 97.3 mln acres (+ 0% vs. 2012)
Sorghum 7.62 mln acres (+ 22 %)
Oats 2.90 mln acres (+ 5 %)
Soybeans 77.1 mln acres (+ 0 %)
All Wheat 56.44 mln acres (+ 1 %)
Winter 41.988 mln acres (+ 2 %)
Other Spring 12.70 mln acres (+ 3 %)
Rice 2.61 mln acres (- 3 %)
Canola 1.65 mln acres (- 6 %)
Soybeans 77.1 mln acres (+ 0 %)
Sunflower 1.684 mln acres (- 12 %)
Cotton 10.02 mln acres (- 19 %)
Give
the current prices of Dec corn $ 5.37 1/2, it is not too surprising
that we see a similar acreage number for corn in 2013/14. What is
interesting is that the southern states (AL, AK, FL, GA, KY, LA, MS, MO,
NC, SC, TN, TX, VA, WV) have increased their cumulative acreage to
12.459 mln, which is 12.8 % of total U.S. acreage for corn, vs. last
year which was only 11.9 %. Prices for new crop corn were at similar
levels during planting season, so I believe that we will see early
bushels in Aug/ Sept coming to the market from these states (AGW with
weather) from corn & sorghum acres. Texas is expected to have 3 mln
acres (+ 30 %) of milo going into the ground in 2013/14 which will
compete with corn during Aug/Sept. I believe that Sept/Dec corn spread
will trend towards a carry vs. currently at 24 cent inverse. I also
believe that, assuming we get decent June weather, U.S. carryout could
gravitate towards 2.0 bln bu +.
As for the wheat acres, USDA is
projecting a slight increase of 2 % vs. last year for winter wheat
acres. However, as we look into the HRW country, most of the heavy
hitters in production like OK, TX, KS, NE, SD, MT, and CO are actually
going to have fewer acres by 2.0 % at 27.400 mln. The gain is all in
the SRW country for about 24 % increase in major states like AR, IL, IN,
KY, MI, MO, NC, OH, TN, and WI. All going well with weather, I believe
that spreads in the new crop months will start to widen out
July-forward for both Chicago and KC. I believe we could also see
something similar in Mpls but spreads have already been widening in U/Z
there for a while now, so it is somewhat limited as full carry is 26
cent vs. 9 cent carry currently.
The oilseed complex looks a
little more interesting as it seems from the USDA forecasts that all
competing oilseeds (including canola, sunflower, peanuts, ottonseed and
soybeans) will have fewer acres overall dedicated to their production.
Soybean acres is expected by USDA to be unchanged vs. last year. This
could make a rather interesting scenario come this summer and fall in my
opinion. An already tight stocks scenario for the U.S. oilseeds
balance sheet is our reality now as we have seen spreads narrow in
soybeans and canola over the recent months due to smaller U.S. crop and
South American logistical problems. I still believe that spreads in
soybeans and meal will continue to narrow due to tight supplies in the
coming months.
Cotton acres are forecasted to reach 10 mln for
2013/14, which means I believe that cotton will probably have to travel
higher in order to buy acres away from other commodities like corn &
soybeans. We have seen consistently strong export sales to China and
other destinations for U.S. cotton over the last several to keep the N/Z
inverse near 3.00 cent, which typically starts to erode as competing
origins usually take over (i.e. Australia, Argentina and Southern
Hemisphere origins).
This has not happened quite yet, so I believe we
will continue to see cotton travel higher and spreads narrow.
For
all intents and purposes, it seems that the stocks report for grains
was bearish as the numbers came out this morning as final results were
higher than market expectations-
CORN 5.398 bln bushels
SORGHUM 91.391 bln bushels
ALL WHEAT 1.234 bln bushels
SOYBEANS 0.999 bln bushels
Still
what was interesting is that the K/N in corn held its ground very well.
I still believe that nearby corn and soybean spreads will hold their
ground currently as farmers will probably, in my opinion, shut off the
selling spicket with this downdraft in corn and soybean prices.
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