By MICHELE F. MIHALJEVICH
Indiana Correspondent

WASHINGTON, D.C. — U.S. farmers intend to plant more corn and cotton this year, but slightly fewer soybeans, according to the latest Prospective Plantings report from the USDA.

Meanwhile, U.S. stocks of corn and soybeans are down, and stocks of wheat are up, the USDA said in its quarterly Grain Stocks report. The reports were released March 31 by the USDA’s National Agricultural Statistics Service (NASS).

Farmers intend to plant 92.2 million acres of corn, up 5 percent from 2010. With the exception of the 93.5 million acres planted in 2007, this would be the highest planted acreage in the United States since 1944, NASS stated.
Planted winter wheat is estimated at 41.2 million acres, up 10 percent from last year, while all wheat planted is projected to be 58 million acres, up 8 percent from 2010.

While the corn planting numbers are strong, the amount reported in storage is substantially below expectations, said Jerry Gidel, an associate with North American Risk Management Services. “That really does suggest that we have not rationed any corn demand at this point,” he said, noting while there have been discussions about ethanol margins, “we did not see, as we went through the winter period here, any substantial setback (in ethanol). We did have a slowdown in ethanol output in February, but I think that was seasonal maintenance downtime. As we go into the spring driving season, there’s going to be plenty of ethanol demand.”

According to the NASS report, corn stocks March 1 totaled 6.52 billion bushels, down 15 percent from March 1, 2010. Analysts had been predicting stocks closer to 6.7 billion bushels, he noted.

Shawn Hackett, president of Hackett Financial Advisors, said in his latest Hackett Money Flow report that he expects farmers to plant 94 million acres of corn, slightly more than the USDA estimate. “U.S. farmers love to plant corn, normally, and if the profit incentive is there to plant more of it, I am of the view that they gladly will. This kind of acreage number with a likely good planting season should begin to promote a substantial increase in U.S. corn carryouts for 2012 and remove the current scarcity trade mantra,” he wrote.

Demand for corn is also overstated, Hackett noted, saying feed demand will not hold up at current prices. Ethanol demand is also likely to be disappointing, he added.

Wheat planting intentions may be up, but Gidel said he isn’t sure if all those acres will get planted: “The Northern Plains are waterlogged. I’m surprised they’re that optimistic about getting their spring planting done. In the Southwest, we’ve had a significant dry spell that started last fall and has continued. If we don’t see a lot of rain soon, we could see some signs of losses and abandonment there.”

The yield is difficult to predict because it’s dependent on the weather in the Southwest and how much actually gets planted in the Northern Plains, he stated. U.S. stocks of all wheat totaled 1.42 billion bushels on March 1, up 5 percent from a year earlier. While there hasn’t been a scarcity of wheat supply, the real demand for it has been overinflated during the last year because of fears over extreme weather events, Hackett explained. Those fears have created a psychology of hoarding and buffer stock rebuilding. Recent high prices have created the economic incentive to plant more acres globally than what is needed, he added.

Cotton acreage is expected to increase 15 percent over last year, to 12.6 million acres, NASS stated. The largest increase, of 548,000 acres, is expected in Texas, while increases of more than 100,000 acres are projected in North Carolina, Georgia and Mississippi, NASS noted.

The amount of soybean acreage is expected to be 76.6 million acres, down 1 percent from last year, but the number of acres planted could still be the third largest on record, NASS said. Iowa and Ohio are among five states where decreases of 100,000 acres or more are expected.

“The soybean estimates, both for stocks and planted acreage, are far below the trade expectations for both,” said Jack Scoville, vice president and futures market analyst with Price Futures Group. “It’s not implying much in the way of rationing. Both numbers imply prices should be able to move higher, if not sharply higher.”

U.S. soybean stocks March 1 were 1.25 billion bushels, down 2 percent from a year earlier. A cutback in soybeans purchased by China could mean a drop in prices, Hackett warned.

“China has been overbuying beans for the last several years to build buffer stocks and given their huge food inflation problem, I believe that they will ease back on this policy to effectuate a substantial drop in soybeans prices,” he wrote.

The potential for a revitalization of the biodiesel industry in the U.S. is dependent on crude oil prices staying high, Hackett explained. “Given the current extreme bearish money flow posture for crude oil at this time, such a bet seems very poor indeed. If crude oil prices start to really drop, then biodiesel coming from soybeans will go back in hibernation,” he stated.

Worldwide issues, such as Japan’s earthquake and tsunami, will affect U.S. exports, at least in the short-term, Scoville said. “Temporarily it has produced a cutback in corn demand but for how long, that’s a good question. Eventually they will return to buying because people have to eat. Once they get their infrastructure issues straightened out, demand will increase. I think they’ll move very quickly to get this done,” he said.

Japanese producers appear to have enough feed for their animals, Gidel said, adding he expects sales to Japan to begin to improve later this summer.
As always, weather is a determining factor in yields, Scoville said, “The stocks report will keep the market attuned to weather because we’ll need all those bushels.”

The question of how the UDSA reports will affect prices and consumers remains to be seen, Gidel said. “There doesn’t seem to be any retail fatigue yet,” he pointed out. “Pork chops that have been $3.99 for several years are going to be more. Will they walk away from higher prices? I think they’ll end up driving less, but make sure they have something to eat.”