Fewer than expected soy acres a surprise
Friday Reports: If we had to select the one surprise from Friday's Quarterly grain stocks and Planted acres report, we lean towards the greater than expected acre reduction for soybeans and then with its quarterly stocks of less than 1 billion bushels. Soybean acres were reduced 1.965 mil acres vs the trade ave est of a 1.763 mil acres and Allendale's estimate of a 1.4 mil acre reduction. Is it enough to shake up production and reduce stocks to create a major shortfall in stocks, not necessarily when projected end stocks for 2005/06 could wind up 207% higher than the 3 and 5 yr ave.
Short Term Grain Weather Focus: Now that the acreage report is history, the trade is very much focused on western Iowa and eastern NE and the potential for ridge building which could harm especially the dry land corn production. Thursday midnight maps suggested a ridge which was strengthening, by 6 am this morning, maps began to reduce the strength.
This ridging or lack thereof is where THEE main focus is presently placed for corn as we enter key pollination phase of corn growth. In the much broader picture several meteorologist agree they do not see a major weather problem which could cause a epic problem for corn production. Much further out, there is some stirring about a potential earlier than normal cold snap for WI and MI. It will be important for both of theses states maturity to stay even if not exceed its 5 yr ave maturity level after pollination is complete.
Quarterly Stocks: For corn June 1 stocks of 4.363 bil bu suggest usage of 2.624 bil bu, the greatest on record dating back to 1976/77 and compares to last yrs 3rd quarter use of 2.436 bil bu, then a record in itself. However the percent of use at 38% is 2% lighter than the recent 3 yr ave of 40%. Today's stocks estimate does imply 4th quarter, ending stocks of 2.335 bil bu vs the three yr ave of 1.386 bil bu and the five yr ave of 1.531 bil bu. This 2.335 bil bu Allendale estimate compares to USDA's projection of 2.176 bil bu.
Corn acres of 79.366 million and using USDA's present yield of 149 bu per acre suggest production of 10.735 bil bu, plus its carry in stocks of 2.176 bil bu less total demand suggest end stocks of 1.266 bil bu vs its present est of 1.091 bil bu. Using Allendale present crop condition yield of 158.5 bpa suggest a crop size of 11.419 bil bu, add in adjusted projected end stocks of 2.335 bil bu, less total demand, suggest end stocks of 1.901 bil bushels. The key to success or failure for projected end stocks for the 2006 crop continues to focus on those dry land corn acres within western Iowa and eastern Nebraska. Allendale continues to use a Dec futures summer rally potential of 2800 with a harvest low which may lean closer to 2300 than 2200. As futures move closer to the high end of the range we anticipate basis to weaken and visa versa when futures are honing in on the harvest lows. Old crop corn needs to be moved to make just enough room for on farm storage and anticipate much better basis levels by mid to late winter 2007 for marketing opportunities.