Corn Plantings at Point of no Return - A Special Report
The report was released to our customers, with trade strategies, on June 5, 2019. Subscribe today to receive these reports along with our Daily Commentary. A free trial is available!
As of June 2nd only 67% of the US corn crop had been planted. This was up 9% from the week before but still way behind the 10-year average of 95%. This means 30.6 million acres need to be planted in June!
This is slowest plantings pace on record (back to 1980). North and western Corn Belt states of ND, SD, NE, KS and MO, which had a May 25th prevent plant date, still had 7.57 million acres left to plant as of June 2nd. South Dakota lagged the most with 3.36 million left. Central Corn Belt states with a prevent plant date of May 31st included IA, MN, and WI, and they had 6.34 million acres left to plant as of the 2nd. The eastern Corn Belt remains the major problem, with IL, IN, OH and MI having 13.66 million acres left to plant and a June 5th prevent plant date.
With the drier weather this week, we could see another 20% planted by Sunday, which would put total planted acreage to 80.7 million acres. (We are assuming that there will be very minimal interest in planting corn after this week.) This would mean a loss of 12.1 million acres from the March 1st prospective plantings estimate and the May USDA supply/demand projection. But even with the dry forecast for the remainder of the week, it could be difficult to get that 20% planted.
If we further assume a drop in yield to 173 bushels per acre from the 176 in the May USDA report (due to the late plantings) and we also assume a 350 million-bushel decline in usage, 2019/20 US ending stocks would come in at 643 million bushels, down from 2.485 billion the May update. This would result in a stocks/usage ratio of 4.5%, which would be the lowest on record and would suggest a price in excess of $6.50 per bushel.
With potential for massive increases in global soybean meal and wheat supplies and a big jump in corn production in South America, we could see 2019/20 US corn usage fall by 1 billion bushels from the current USDA projection. But even under those circumstances, ending stocks would slide to 1.293 billion bushels and result in a stocks/usage ratio of 9.5%. There have been only six years in the last 46 in which the stocks/usage ratio was lower.
We also think that given the late start to plantings, there is a better chance of seeing a 170 bushel-per-acre yield than the current USDA estimate of 176 bushels per acre. If we assume a 170 yield and 1 billion bushels in demand destruction, this would put 2019/20 ending stocks at 1.071 billion bushels, with a stock/usage ratio of 7.8%. This would be third tightest year in the past 46.
The corn market has the type of fundamental setup to attract 200,000 to 300,000 contracts of net buying in the weeks ahead. December Corn support comes in at $4.23 ½ and $4.20, with $4.65 ½ and $4.78 ¾ as the next upside targets. Additional, long term targets include $5.04 and $5.66 ¾.