March 22, 2016

Any Information in Mid-Year Soybean Stocks Estimate

Next week (Thursday March 31) USDA will release the quarterly Grain Stocks report. Typically it is overshadowed by the Prospective Plantings report released on the same date. However, as Todd Gleason reports, it occasionally provides a surprise to the trade.



For soybeans, the stocks estimate is often very near the level expected by the market says University of Illinois Agricultural Economist Darrel Good. This is because we generally know how many soybeans are used at any point during year based off the magnitude of the domestic crush and the exports, both of which are tallied either by the government, the industry, or the two combined. The stocks estimate, says Good, really does indicated the magnitude of seed, feed, and residual use of soybeans in the previous quarter. Unlike corn, for which feed and residual use is a large portion of disappearance, seed, feed, and residual use of soybeans is a relatively small portion of disappearance during the winter months. However, he cautions, occasionally the March 1 stocks estimate provides a surprise.

Based on the average trade guess reported by news services, the March 1 stocks estimate has deviated from market expectations by more than 30 million bushels nine times and by more than 60 million bushels four times in the past 25 years.

The expected level of soybean stocks on March 1 this year can be calculated. The USDA’s Oilseed Crushings, Production, Consumption and Stocks report provides information for December of 2015 and January of 2016. The estimate for February will be released April 1. The National Oilseed Processors Association (NOPA) estimate of the magnitude of the February soybean crush by its members can be used to estimate the total February crush. For the nine months that USDA has provided soybean crush estimates (May 2015-January 2016), the USDA crush estimates have exceeded the NOPA crush estimates by 6.4 percent. Applying that ratio to the NOPA February crush estimate, suggests to Darrel Good that 483.1 million bushels of soybeans were crushed in the second quarter of the current marketing year. It’s possible to calculate the number of soybeans exported in the last quarter, too.

Based on a combination of USDA and Census Bureau export estimates, second quarter exports totaled just over 677 million bushels.

This leaves the seed, feed, and residual usage factor. That’s tougher to figure, but a much smaller number. If this year follows the average consumption pattern Good says it would be about 12 million bushels in the second quarter. So, 483 crushed plus 677 exported plus 12 fed equals roughly 1.173 billion bushels consumed in the second quarter. Subtract that from the first quarter stocks, plus the imports and you get 1.55 billion bushels of soybeans on hand March 1st in the United States. The Grain Stocks report March 31 shouldn’t vary much from this number, but it could says Darrel Good.

If the March 1 stocks estimate is surprisingly large or small, the accuracy of USDA’s 2015 production estimate may be called into question. The USDA has revised the previous year’s production estimate by varying amounts in 20 of the past 25 years based on the stocks estimate at the end of the marketing year (September 1). However, it would be pre-mature to question the accuracy of the production estimate based on the March 1 stocks estimate due to the large variation in the quarterly pattern of seed, feed, and residual use of soybeans.

The eight largest revisions in the production estimates following the USDA’s September 1 stocks estimate ranged from 1.1 to 3.5 percent. Only three of those eight large revisions followed a surprise in the March 1 stocks estimate that exceeded 30 million bushels. Conversely, of the nine years in which the magnitude of the surprise in March 1 stocks estimate exceeded 30 million bushels, only three were followed by revisions in the production estimate that exceeded one percent.


March 16, 2016

Are Soybeans-After-Soybeans Profitable

Low commodity prices have farmers around the nation considering a different crop rotation. Some have been wondering if it might be more profitable to plant soybeans after soybeans this year. University of Illinois Extension Economist Gary Schnitkey addressed the issue on the FarmDocDaily website and told Todd Gleason farmers in northern and southern Illinois might consider the option.


March 16, 2016

Allendale Releases 2016 Acreage Survey Results

Allendale, Inc. estimates US grain and oilseed producers will increase corn and wheat acres, while lowering the number of acres sown to soybean. All three survey totals are higher than USDA’s Agricultural Outlook Forum estimates. 
 
Corn planting intentions of 90.431 million acres would be the sixth largest acreage of the past ten years. Allendale’s production estimate would imply a production increase of 31 million over last year’s record.
 
 
Soybean planting intentions are seen at 82.575 million acres, the third largest ever. Allendale’s production estimate would be 207 million under last year’s record level due to a return back from record 2015 yields.
 
Wheat acreage is estimated at 51.769 million acres. This would be the smallest acreage since 1970. Allendale’s production estimate is 53 million under last year’s level.
 

The results are based on the firm’s 27th annual Producer Acreage Survey. Submissions were made directly by producers in 25 states by phone and online from February 26, 2016 to March 11, 2016.
 
The United States Department of Agriculture is now surveying some 80,000 producers on their cropping intentions for the year. USDA's 2016 Prospective Plantings report is due March 31st.

March 14, 2016

Grain Stocks & Prospective Plantings Reports Previews

USDA will officially kick off the new year for the spring planted crops when it releases two reports on the last day of the month.



 

The Grain Stocks and Prospective Plantings reports will be released March 31st. Darrel Good says both will help set the tone of the trade for corn and soybeans going forward.

Quote Summary - The Stocks report will be modestly important as it always is for corn. It will give us a reading on how fast we are feeding last year’s crop, but the real information will be in the Prospective Plantings report. It can be a mixed bag. This is because we all know actual plantings deviate from intentions. Certainly, though, when we see the March survey and what farmers are planning this year, it will provide a lot of information about the potential size of the upcoming crops.

The Prospective Plantings report is set up to be very interesting. More than a few acres around the United States need a new home on the spreadsheets. For instance, last fall farmers seeded about 2.8 million fewer acres of winter wheat than they did the previous year. When you couple those acres with what most expect to be fewer Prevent Plant acres, it creates an interesting combination says the University of Illinois agricultural economist.

Quote Summary - On the surface this says, “We’ll have more acres available than we had last year”. What the intentions report will give us a hint at is whether producers are thinking about leaving some acreage idle in 2016 because of the generally low commodity prices. For example, will the winter wheat acres that didn’t get planted go to fallow, or to annual pasture, or will they go to sorghum or an oilseed. Will we see some of the so called fringe areas leave some acreage idled as the numbers would suggest we’ve seen in the past when prices are low. So, that big picture question will be most important in the March plantings report.

Again, the reports will be released March 31st. Last year there were 6.7 million acres of Prevent Plant. That’s on the high side because of the heavy 2015 rainfall. Darrel Good expects this year to be something closer to 3 million acres. And, when you round up to 3 million fewer acres of winter wheat, you get about 6 million float acres that need a home this year either idled, or planted.


March 11, 2016

Illinois Soybean Summit | Rockford Edition

This morning, March 11th, DTN Progressive Farmer meteorologist Bryce Anderson told farmers at the Illinois Soybean Summit weather would cap this year’s potential yields. Todd Gleason is emceeing the event, and asked Anderson if he means it is unlikely for yields to be better than USDA’s trendline.



The Senior Grains Analyst for Farm Futures Magazine was also at the summit. Bryce Knorr told the group to reward market rallies.



The Illinois Soybean Summit took place Friday March 11, 2016 in Rockford.


March 09, 2016

WASDE Report a Shade Friendly

USDA’s March World Agricultural Supply and Demand Estimates report didn’t really change much, still that seems a shade friendlier than before to University of Illinois Agricultural Economist Darrel Good.


 

Summary Table
USDA WASDE - United States


 

U.S. Ending Stocks
2015/2016 Marketing Year

 

World Ending Stocks
2015/2016 Marketing Year (in million metric tons & billion bushels)


March 09, 2016

El NiƱo & 2016 Corn Yields

There continues to be an immense amount of discussion about the impact of El Niño on agriculture. Many are wondering what will happen to the Midwest corn crop this summer. Univesity of Illinois agricultural economist Darrel Good and Scott Irwin explored the historical data in order to develop some 2016 expectations. You may read their conclusions on the FarmDocDaily website. Irwin spoke at length with Univesity of Illinois Extension’s Todd Gleason about the research during WILLAg.org’s Closing Market Report.




February 29, 2016

Benchmarking Soybean Production Systems

Soybean farmers in ten states across the Midwest are being asked twenty questions. Todd Gleason has more on a Soybean Checkoff funded project to benchmark the yield impact of different production practices.


February 27, 2016

2016 Crop Insurance & 2015 ARC County

On February 18th, the National Ag Statistics Service (NASS) released county yield data for the 2015 crop year. This post uses the NASS county yields and current MYA price projections from the USDA to estimate 2015 payments for the Ag Risk Coverage county level program (ARC-CO). Note that the final yields and prices used to determine actual payment levels will differ from the values these payment estimates are based upon. The final MYA price for corn and soybeans will not be known until the marketing year ends in August, and the final yields FSA will use to determine ARC-CO payments will likely not be released until September. See the farmdoc daily article from December 1, 2015 for a more detailed discussion and comparison of NASS county yields and FSA county yields used for the ARC-CO program.

Current MYA Price Projections

The midpoint of the February WASDE range for the 2015/16 MYA corn price is $3.60 (range of $3.35 to $3.85). This is 32% below the 2015 ARC program benchmark price of $5.29. Since the ARC-CO program provides a guarantee equal to 86% of the county’s benchmark revenue, the projected corn price implies that the actual corn yield in a county can be up to 26% higher than the ARC benchmark yield to trigger a payment. For soybeans, the midpoint of the WASDE range is $8.80 (range of $8.05 to $9.55). This implies that the actual soybean yield in a county can be up to 20% above the 2015 benchmark yield to trigger an ARC-CO payment on soybean base. Counties where actual corn (soybean) yields are up to 11.7% (6%) above the benchmark yield for 2015 will trigger the maximum ARC-CO payment, which equals 10% of the county benchmark revenue.

Estimated ARC-CO Payments for Corn and Soybeans

Figure 1 illustrates estimated 2015 ARC-CO payments on corn base acres. The county yield data from NASS covers only a portion of the counties in the US where ARC-CO is available for corn. More than 70% of the counties in the US where a NASS yield was published are estimated to trigger an ARC-CO payment for corn base in 2015, with over 40% of those counties triggering the maximum payment equal to 10% of the county revenue benchmark.

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Figure 2 shows estimated 2015 ARC-CO payments on soybean base acres. Again, NASS reported a county yield for only a portion of the counties with the ARC-CO program for soybeans. ARC-CO payments are estimated to be triggered on over 60% of counties with a NASS soybean yield reported, with more than 30% of counties triggering the maximum payment on soybean base acres.

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Estimated ARC-CO Payments in Illinois

In Illinois the average estimated ARC-CO payment on corn base is over $65 per base acre. County level payment estimates for Illinois are illustrated in Figure 3. Payments would be triggered in over 90% of Illinois counties, and the maximum payment would be triggered for corn in roughly 2/3 of Illinois counties. Only three counties with a corn yield reported by NASS in Illinois for 2015 would not receive a payment at the current price projection of $3.60. These counties, shown in white in Figure 3, are Monroe, Piatt, and Pope. NASS reported county yield averages well above the benchmark yield levels in all three of these counties.

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Adjusting the projected MYA price for corn to the high end of the WASDE range ($3.85) would still result in ARC-CO payments on corn base averaging over $45 per base acre across the state, with more than 75% of counties triggering payments and just over 25% of counties triggering the maximum payment.

The average estimated ARC-CO payment on soybean base in Illinois is just over $28 per base acre. Payments would be triggered in more than 70% of Illinois counties, with more than 15% of counties triggering the maximum payment. A handful of counties, located mainly in southern and east central Illinois, had reported NASS yields which were high enough to result in a zero ARC-CO payment estimate on soybean base.

Increasing the projected MYA price for soybeans to the higher end of the WASDE range ($9.55) lowers the average ARC-CO payment estimate to $6.60 per base acre with less than 40% of counties triggering a payment, and no counties triggering the maximum payment on soybean base acres.

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Summary

Despite corn and soybean yields which generally above average in most areas in 2015, low price levels projected for corn and soybeans for the 2015/16 marketing year make ARC-CO payments for both crops likely across much of the US. Using county yields released by NASS last week, payments for ARC-CO were estimated at the midpoint of the price range in the February WASDE report for corn and soybeans. Using these yields and price levels, a large proportion of counties are expected to trigger 2015 ARC-CO payments for corn and soybeans, with a significant number of counties hitting the maximum payment level of 10% of the county benchmark revenue.

In Illinois, the ARC-CO payment for corn is estimated to average over $65 per base acre with only three counties not expected to receive a payment. For soybeans, the average ARC-CO payment estimate is just over $28 per base acre in Illinois, again with the majority of counties expected to receive some payment.

2015 ARC-CO payments are only provided as estimates at this time. The final yields used in calculating payments can differ from the yields released by NASS, and will also cover additional counties in the US. The final MYA price levels for corn and soybeans will not be known with certainty until the marketing year ends in August. However, where NASS yields are available, estimates for the 2015 ARC-CO payment levels can be helpful for planning purposes.


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