USDA March 10th Report Pulls No Punches

Armstrongcorn20The March 10th USDA report was a lot like dreaming about an old girlfriend. In your mind you might think like kissing her again might be a good thing.  However if the day came where that reality ever presented itself, it wouldn’t be so pleasant.  That’s how I feel about kissing the USDA. I think many of us thought back on January 12 that they would come to their senses after they did their re-survey.

On March 10th the USDA gave their latest supply and demand update.  The new US corn number is 13.131 billion bushels with soybeans coming in at 3.359 billion bushels.  For those of you who I met in Louisville Kentucky as well as many of you who are in the Canadian hinterland the USDA wasn’t so wrong way back in January.  They moved the goalposts back then and in their March 10 report they solidified them.  That cool and cold summer last year that cause so many quality issues in the US corn crop obviously had the other effect too.   With the national corn yield of 164.8 and with many weather prognosticators talking about a rerun of 2009 maybe all bets are off going forward.

It makes me think about a 90 million planting number for corn, with harvested acres taking yield on the trendline up to 13.5 billion bushels for next year.  Corn usage is sitting at 13.015 billion bushels which is down slightly because our American friends had 100 million bushels  less to export.  We need to get these bulls running again.  One production hick up will upset this whole corn bandwagon.

Soybeans on the other hand had their ending stocks cut about 20 million bushels.  I was glad to see something cut because if that had not taken place the Bears would be jumping out the windows.  Chinese imports of American soybeans have certainly been good for the industry.  However, with the Brazilian and Argentinian crop coming to the ports, I don’t think it will be long before we see cheaper South American soybeans headed toward the Orient.

So of course one of the next big market movers is the March 30 USDA prospective plantings report.  For some this is the unofficial starting gun on the spring planting season.  However to others is like some fool getting up on a soapbox yelling fire in a crowded theater!  In other words it is more like a shot in the dark than the starting gun on the planting season.  Will we do know is that there are about 8 million floating acres in the United States that need to find a home.  This represents 6 million acres not planted into winter wheat last season and 2 million acres from the conservation reserve.  Some of this might go to cotton, some to Milo but I believe at least four or five million acres will go to corn and soybeans.

At the same time we had a bit of a hiccup on the other side of the world this past week.  Greece is in financial trouble and it is up to Germany and the Europeans to clean it up.  The problem is that Italy and maybe even France has some similar issues.  At a certain point that should mean that the US dollar should go up in value, in turn sending the loonie down.  However, at this point all it is doing is destabilizing the global economy and hurting grain demand.  For producers with bins full of corn across North America, a little bit of economic instability is something not needed.

Of course, putting this all on paper and trying to figure out if you have enough corn or soybeans is a very tidy process.  Where it gets tricky is when you walk out into the field and it’s either all mud or dryer than a desert.  That’s why we plant a crop and as Bill Russell used to say as captain of the Boston Celtics, that’s why they keep score.  You can talk about it all you want but at the end of the day these crops have to be planted and nobody knows what is going to happen after that.

The market did not fall apart after the bearish talk of today.   In some ways I can see the hype building into the March 30 report.  Somebody will say there is less acres and somebody will say there is more.  However, remember the USDA you thought you knew in January.  They are the keeper of the goalposts, and at the end of the day they’re never very wrong.