Corn Acres Higher, But Grain Stocks Remain Tight

Corn Acres Higher, But Grain Stocks Remain Tight

USDA survey indicates U.S. farmers intend to plant 5% more corn acres in 2011 than in 2010, but corn supplies are already down 15% from a year ago and are unlikely to increase. US soybean acres are projected at 76.6 million acres for 2011, down 1% from 2010.

USDA's 2011 planting intentions report released March 31 indicates farmers nationwide intend to plant 5% more corn acres this year than last year, but corn supplies are already down 15% from a year ago and are unlikely to increase. Grain traders took a look at the acreage intentions report, along with a USDA stocks report showing strong export numbers last week, and they drove corn up to $6.93 per bushel. Soybean prices gained as well, rising to $14.10 per bushel.

"While I'm not forecasting that this will happen, we could see double-digit corn prices if a legitimate weather scare makes headlines this summer," says Arlan Suderman, grain market analyst for Wallaces Farmer. Corn acreage is critical to livestock producers, ethanol makers and food manufacturers because corn stocks are currently at their lowest levels since 1996, and that was back in the days before the boom in ethanol production. Ethanol now consumes one-third of the U.S. corn crop. The rising price of corn this year has already led to significant increases in meat prices and in farmland values.

Crops will need perfect weather this summer, little room for error

Market analysts are skeptical that the 92.2 million acres USDA is projecting for corn planting nationally, up from 88 million planted last year, will be enough to rebuild corn stocks that are depleted by strong demand from exports and ethanol production. For corn, a big loss of acres is expected to occur in the southern U.S., where 15% of the acres the survey indicates, are likely to switch from corn to cotton in response to the highest cotton prices since the Civil War.

There are worries that floods and wet fields in the Dakotas and Minnesota will delay corn planting in 2011 and cause farmers there to switch acres to soybeans, which can be planted later. This will be a nervous summer. "We'll need perfect weather in the U.S. this summer. There is little margin for error," observes Don Roose, a market analyst with U.S. Commodities in West Des Moines.

Looking at weather cycles and other data, Iowa State University Extension climatologist Elwynn Taylor is warning that Iowa is overdue for a drought, as the last major drought to occur in the Corn Belt occurred in 1988.

Corn prices will have to climb higher yet to ration demand

Market analysts generally are saying 94 to 95 million acres of corn need to be planted in 2011 to rebuild feed grain stocks. That means corn prices will likely have to climb higher to attract more acres from soybeans and ration demand from livestock, exports and ethanol production. The USDA report on exports last week shows the largest weekly corn sales in the current marketing year that began last September 1, reinforcing the reality that the U.S. is the supplier of choice for corn in the world market.

USDA's 2011 Prospective Plantings report released March 31 indicates corn acreage in the U.S. will be up 5% from 2010, to 92.2 million acres planted this year. Acreage increases of 250,000 acres are expected in Iowa, Kansas, Nebraska, North Dakota, Ohio and South Dakota. Iowa is expected to plant 13.9 million acres of corn, compared to 13.4 million acres in 2010, a 4% increase.

The 5% increase in U.S. expected corn acreage represents a nearly 4 million acre rise from 88.2 million acres planted in 2010. If 92.2 million acres do indeed end up being planted in 2011, it would approach the 93.5 million acres planted in 2007, which was the largest corn acreage in the U.S. since World War II.

Planting intentions survey shows U.S. soybean acres down 1%

The survey indicates U.S. farmers intend to plant 76.6 million acres of soybeans in 2011, down 1% from last year. But, if realized, this would be the third largest total for soybean planted acreage on record. The top five states in intended soybean acres are Iowa (9.4 million acres), Illinois (9.1 million acres), Minnesota (7.4 million acres), Indiana (5.35 million acres) and Missouri (5.3 million acres). The planted acres in New York and North Dakota will be the largest on record at 305,000 acres and 4.35 million acres, respectively.

Looking at the big picture, overall U.S. farmers report they intend to plant 323.8 million acres across the 21 major crops surveyed for the March 31, 2011 report. That's a 7.09 million (2.2%) increase from 2010. USDA surveyed 85,000 farm operators across the U.S. from February 26 to March 17, 2011 to gather the data for this planting intentions report. USDA will publish data on actual planted acres for 2011 in its June Planted Acreage report, to be released June 30, based on surveys of actual planted acreage earlier in June.

Wheat planted intentions are estimated at 58.0 million U.S. acres for 2011, up 8% from last year. Cotton plantings nationwide are for 2011 are expected to total 12.6 million acres, 15% above last year.

Iowa growers react to USDA planting intentions report

The March 31 planting intentions report projects corn acreage in the U.S. will likely be up 5% from 2010, to 92.2 million acres planted this year. It projects Iowa to be up about 4%. Acreage increases of 250,000 acres are expected in Iowa, Kansas, Nebraska, North Dakota, Ohio and South Dakota. Iowa is expected to plant 13.9 million acres of corn, compared to 13.4 million acres in 2010.

In a joint conference call after the report was released, Iowa Corn Promotion Board and Iowa Corn Growers Association leaders responded to the results of the USDA planting intentions survey. ICPB chairman Dick Gallagher, a farmer from Washington County in southeast Iowa, and ICGA president Dean Taylor a farmer from Jasper County in central Iowa, both said the corn acre estimate were within their earlier expectations and near what USDA had predicted earlier.

"This 2011 planting intentions survey is the first official indication that U.S. producers are responding to the market signals to expand their corn production acreage," says Taylor. "However, it is important that people understand that these March intentions are just that, intentions." The June USDA planted acreage report, released at the end of June, and based on surveys taken in early June, will more closely reflect the actual number of corn and soybean acres farmers are planting this year.

"Iowa farmers currently have a plan on what they will be planting in their fields," says Gallagher. "The important thing to remember is that these intentions and farmers' plans are dependent on what the weather is going to be this spring."

ISA leaders concerned about reduction in U.S. soybean acres

Nationally, USDA's acreage intentions survey projects 76.6 million acres of soybeans will be planted this year, down 1% from last year. If realized, it will be the third largest U.S. planted acreage for soybeans on record. Meanwhile, corn acres at 92.2 million acres for 2011, up 5% from last year and 7% from 2009, indicate what market prices have shown this winter. That is, corn is beating out soybeans for profit potential per acre.

In Iowa, the intentions survey projects farmers will plant 9.4 million acres of beans, down 400,000 acres or 4% from 2010. Iowa corn acres are projected at 13.9 million acres, up 500,000 acres or about 4% from 2010, so corn is taking planted acreage away from beans in Iowa as well as in the nation.

Iowa Soybean Association director of market development Grant Kimberley says: "As we heard repeatedly on our recent trip to China, feed demand and therefore soybean demand in China continues to grow, driven by an increasing per capita Gross Domestic Product growth rate of 14.2%. Feed demand has been growing in China by an average of 7.7% for the past 10 years, and it grew 12% last year. Soy meal consumption in China has grown by 11.7% per year over the past 10 years and that growth is expected to continue, driven by continued economic growth in Asia, which results in increased demand for meat and feed."

Look for very volatile soybean prices over next several months

Kirk Leeds, chief executive officer of ISA, says: "With lower projected year-end stocks and unprecedented global demand for soybeans, we can't help but be concerned with any reduction in soybean acres and thus soybean production in the U.S. Numerous industry officials in China were clear that China's insatiable appetite for U.S. soybeans will continue to grow. Additionally, China is expected to see a reduction of 10% or more in soybean acres this year. Combined with the anticipated reduction of soybean acres in the U.S., this should be a very exciting market over the next several months."

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