COLUMN-Heavy U.S. supply outlooks dent optimistic corn market -Braun

By Karen Braun

NAPERVILLE, Ill., Feb 23 (Reuters)Although not totally unexpected, corn bulls were bummed on Thursday to see the sizable supply numbers in the U.S. Department of Agriculture’s annual outlook for the upcoming U.S. crop year.

But they could take some solace in the fact that both acreage and yield numbers – the latter of which is very meaty on the part of the government – are far from settled.

Recent price trends imply better profitability for U.S. farmers to plant corn over soybeans this year, and both analysts and USDA agree corn acres will rise above the year-ago levels. USDA’s 91 million corn acres were nearly identical to the trade’s 90.9 million and above last year’s 88.6 million.

USDA has not yet surveyed farmers for planting intentions, which it will start doing next week, and the results published at the end of March have been tough to predict in recent years.

I polled Twitter on Wednesday for the most likely surprise in this year’s intentions, offering choices of corn acres high or low or soybean acres high or low. After more than 700 votes, an upside surprise in corn area was the winner with 42% of the vote, and a surprise on the low side in soybean area was the loser with 12%.

Low soybean area was the outcome on Thursday as USDA’s 2023 forecast of 87.5 million acres was 1.1 million below the average trade estimate and equivalent to the 2022 area. Some of the extra acreage may have gone to wheat, which USDA placed at 49.5 million acres versus a trade guess of 48.7 million.

USDA’s 2023 cotton plantings may have been higher than expected at 10.9 million acres, down from 13.76 million in 2022 but up from 9.5 million originally slated for 2023 in the long-term projection tables last fall. Those long-term tables also had 2023 wheat plantings at 47.5 million acres, soybeans at 87 million and corn at 92 million.

USDA may be too optimistic on area somewhere among top crops as combined U.S. corn, soy and wheat plantings are forecast at 228 million acres, the highest since 2014’s 230.7 million. U.S. crop plantings have not recently matched the stronger levels seen earlier last decade.

Regarding the Twitter poll, a surprisingly low soybean area in March intentions is statistically the most probable outcome, having occurred in seven of the last 10 years. Those seven years include both ones where bean prices were relatively high versus corn and relatively low.

March intentions have not recently favored the pre-report estimates. The last time the trade guess was within 1% of the reported corn acres was 2015, and for beans it was 2014. The last time both crops were missed by less than 1% was 2011.


USDA’s Thursday estimates reflected market expectations of rising U.S. corn supplies in 2023-24, albeit to a stronger degree at 1.89 billion bushels versus the trade guess of 1.81 billion and compared with 1.27 billion in 2022-23. But there is one major standout among the agency’s corn numbers.

USDA’s trend corn yield is calculated with planting progress and summer weather assumptions. With no evidence yet that 2023 will be abnormal, USDA’s computation spits out 181.5 bushels per acre, some 4.8 bpa higher than 2021’s record.

While probably not impossible, reaching that mark is a steep ask.

If final 2023 yield meets or exceeds 181.5 bpa, it will be the first time since 2004 that all the following conditions were satisfied: yield is record, yield is equal to or larger than USDA’s trend yield, the trend had predicted a new record and the trend was the largest one ever projected.

When a crop gets smaller, demand also usually contracts. But to demonstrate balance-sheet sensitivity to yield, plugging in the prior record of 176.7 bpa instead of 181.5 in USDA’s table chops 2023-24 U.S. corn ending stocks to 1.49 billion bushels, if changing nothing else.

There may already be downside risk in USDA’s demand outlook, even with a good corn crop. The agency slated 2023-24 U.S. corn exports at 2.2 billion bushels, up from 1.925 billion this year but below the prior two years. That could be reasonable given the 15 billion-bushel harvest estimate.

But the assumptions are debatable. Continued robust demand from China is one of USDA’s cited reasons for higher exports on the year. U.S. corn export sales to China for 2022-23, while strong compared with most other years, are down an average of 70% for the same date in the last two years.

Most of those 2022-23 sales occurred nearly a year ago, before China opened its doors to Brazilian corn imports late last year. China has no U.S. corn on the books so far for 2023-24, but there has recently been some smaller buying activity for 2022-23.

Karen Braun is a market analyst for Reuters. Views expressed above are her own.

(Writing by Karen Braun Editing by Matthew Lewis)

((; Twitter: @kannbwx))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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