COLUMNISTS

June 30 USDA acreage report surprises grain marketing analysts

Kent Thiesse
Many times, the June USDA report can have a big impact on grain market trends, either upwards or downwards. 2021 did not disappoint.

The late June USDA acreage report is always highly anticipated, as it's the first hard data made available after the March USDA plantings intentions report, which gives an indication of crop production levels for a given growing season.

Many times, the June USDA report can have a big impact on grain market trends, either upwards or downwards. 2021 did not disappoint, with an initially positive market response for both corn and soybeans.

Producers planted less acres of both corn and soybeans in 2021 than grain marketing analysts expected, according to the latest USDA report on June 30. USDA surveyed more than 70,000 agricultural producers during the first two weeks of June to gather information for the June 30 USDA report.

The biggest surprise in the June 30 USDA acreage report was that an estimated 92.7 million corn acres were planted in the U.S. this year. This was an increase of over 1.5 million planted acres from the March USDA planting intentions report and represented an increase of about 2% from the 2020 planted acres.

The estimated 2021 corn acreage compares to 90.8 million acres in 2020, 89.7 million acres in 2019, 88.9 million acres in 2018, and 90.2 million acres in 2017. The 2021 acreage would be the fourth highest in the past 10 years, trailing only 97.3 million acres in 2012, 95.4 million acres in 2013, and 94 million acres in 2012.

The USDA estimate for 2021 U.S. corn acreage was over 1 million acres lower than the pre-report average grain trade estimates, which resulted in a significant price rise for corn futures prices on the Chicago Board of Trade (CBOT) on June 30.

The June 30 USDA report estimated that 87.6 million acres of soybeans will be planted in 2021 across the U.S., which is exactly the same as the March 1 USDA acreage estimate. The 2021 U.S. soybean acreage projection does represent an increase of 5%, or 4.5 million acres from the 2020 planted acres.

The estimated 2021 U.S. soybean acreage compares to 83.1 million acres in 2020, 76.1 million acres in 2019, 89.2 million acres in 2018, and 90.2 million acres in 2017, which was a record for U.S. soybean acreage. The USDA projection was below the average pre-report grain trade estimate by 1 million acres and was lower than even the lowest projection by grain marketing experts. Soybean prices on the CBOT were up nearly 90 cents per bushel on June 30, immediately after the USDA report was released.

Based on the June 30 report, 2021 corn acreage is expected to increase in 15 of the 41 reporting states, decline in 17 states, and stay the same in six states, as compared to 2020 acreage. The biggest percentage increases in 2021 corn acreage from last year in the upper Midwest were increases of 85% in North Dakota, 21% in South Dakota, and 6% in Minnesota. The combined 2021 corn acreage for North Dakota and South Dakota is estimated at 9.6 million acres, which is only surpassed by Iowa at 13.1 million acres, Illinois at 11.2 million acres and Nebraska at 9.7 million acres. The three largest corn acreage states are all expected to have lower acreage in 2021 than 2020, with a decline of five percent in Nebraska, four percent in Iowa, and one percent in Illinois. Corn acreage in Minnesota is projected at 8.5 million acres, with Wisconsin projected at 3.9 million acres.   

2020 soybean acreage is expected to increase or remain steady in 25 of the 26 major soybean producing states, as compared to 2020 acreage levels with only Kansas showing a three percent year-to-year decline in soybean acreage. The biggest increases in the estimated 2021 soybean acreage compared to 2020 acres are increases in Georgia at 30%, Texas at 29% and South Carolina at 26%; however, these states combined only account for 675,000 soybean acres. North Dakota is estimated to have 7.2 million soybean acres in 2021, which represents an increase of 25% above the 2020 acreage.

North Dakota now ranks fourth in total soybean acreage, trailing only Illinois at 10.7 million acres, Iowa at 9.9 million acres, and Minnesota at 7.7 million acres. Other 2021 soybean acreage estimates are Indiana at 5.7 million acres, South Dakota at 5.5 million acres, Nebraska at 5.4 million acres, Ohio at 4.9 million acres and Wisconsin at 2.2 million acres.

The June 30 USDA report pegged total 2021 U.S. wheat acreage at 46.7 million acres, which includes 11.6 million acres of hard red spring wheat. The projected 2021 wheat acres would be an increase of 2.4 million acres over the 2020 total, which was the lowest total U.S. wheat acreage since USDA began tracking national crop acreage in 1919.

Kansas is projected to have the highest 2021 wheat acreage at 7.3 million acres, followed by North Dakota at 6.8 million acres, Texas at 5.6 million acres and Oklahoma at 4.3 million acres. Minnesota is projected to have 1.2 million wheat acres in 2021, which is a decline of 15% from the 2020 acreage, while South Dakota is estimated at 1.5 million acres in 2021, an increase of three percent in wheat acreage.

Quarterly grain stocks summary

The USDA quarterly grain stocks report released on June 30 indicated a total U.S. corn inventory of just over 4.1 billion bushels on June 1, which represented an 18% decline from the corn inventory of near 5 billion bushels a year ago.

Approximately 42%, or 1.74 billion bushels, of the total U.S. corn inventory was in on-farm storage on June 1. On-farm corn inventories on June 1 included 340 million bushels in Iowa, 300 million bushels in Minnesota, 210 million bushels in Nebraska, 195 million bushels in Illinois, and 110 million bushels in South Dakota, all of which are well below comparable on-farm inventories a year ago.

The grain stocks report showed a total of only 220 million bushels of soybeans stored on farms on June 1, which is down 65% from the 633 million bushels of soybeans in on-farm inventories on June 1, 2020. This included only 29 million bushels of soybeans in on-farm storage in Minnesota, 39 million bushels in Iowa, 38 million bushels in Illinois, and 19 million bushels in Indiana. These levels of on-farm soybean stocks on June 1 are at some of the lowest levels in many years.  

Grain price impacts

Futures prices on the Chicago Board of Trade (CBOT) for both corn and soybeans increased substantially following the release of the USDA crop acreage and quarterly grain stocks reports on June 30.

Both nearby and new crop CBOT corn futures rose the 40 cent daily trading limit following the release of the USDA reports, while CBOT soybean futures increased by close to 90 cents per bushel after the USDA reports were released.

July CBOT corn futures closed at $5.99 per bushel on June 30, while December futures closed at $5.88 per bushel. July CBOT soybean futures closed at $14.30 per bushel and November soybean futures at $13.99 per bushel on June 30. 

The increase in cash corn and soybean prices has given farm operators that still have 2020 grain in storage another opportunity to sell remaining grain inventories at higher prices than they anticipated earlier in the year. Cash corn prices at many locations in the Upper Midwest were $6.00 to $6.50 per bushel or higher, with cash soybean prices near $14.00 per bushel or higher on June 30.

This compares to local cash prices in the Upper Midwest of just over $3.00 per bushel for corn and near $8.25 per bushel for soybeans on June 30, 2020. Many locations in the Upper Midwest have had a positive basis for corn in recent weeks, meaning that the local cash corn price is higher than the corresponding nearby CBOT futures price. There has not been an extended period of this situation for many years, which is likely the result of the extremely tight “on-farm” corn stocks that exists in many areas.  

The rise in “new crop” CBOT futures and local cash forward contract prices following the June 30 report is also providing some opportunities for farmers to forward price some of the expected 2021 corn and soybean production. The volatility in grain prices from day-to-day, along with drought concerns in many areas, has made grain pricing decisions difficult in recent weeks. Locking in a price on some of the 2021 production can be a very good risk management strategy during these uncertain times.

Current local new crop price bids in the Upper Midwest have been $5.00 to $5.50 per bushel for corn and $12.00 to $13.00 per bushel for soybeans in many instances. This offers some of the best new crop price bids that we have seen in several years in early July.

Kent Thiesse

Kent Thiesse is the farm management analyst and senior vice president at MinnStar Bank, Lake Crystal, Minn.