USDA Crop Report and You

The USDA released its planting projections for the coming spring and statistics for inventories of stored grain.   These reflect farmers planting intentions and the current picture for grains on hand. 

Planned Acreage (million acres):

• Corn: 92.2 vs. 91.7 — Up 5% year-over-year, becoming the second highest planted acreage in the U.S., only behind the 93.5 million acres planted in 2007.

• Soybean 76.6 vs. 76.9 — Down 1%, yet the third largest planting on record.  

• Wheat 58.0 vs. 57.30 — Up 8%

• Cotton: 12.6 vs. 13.2 — Up 15%

Stocks (Billion bushels):

• Corn: 6.52 vs. 6.701 — Down 15%

• Soybean: 1.25 vs. 1.20 — Down 2%

• Wheat: 1.42 vs. 1.39 — Up 5%

While acres planted will increase, there is concern about the decrease in stored grain inventories. US consumption and exports to countries such as China, that are hoarding grain to meet their own consumer needs, mean there may be a squeeze between supply and demand. 

The USDA report triggered price increases as everyone from farmers to ethanol producers watched.  Without a doubt, the increase in commodity prices will be passed onto consumers who will continue to see higher food prices at the supermarket.  And, a larger portion of everyone’s budget will be going to food. Don’t just think corn and cereal, but meat and milk prices will be affected too.  Not pretty for the average person.

The impact of price increases in food may also affect the federal incentives supporting ethanol production.  Federal subsidies are set to expire at the end of 2011, and Congress is likely looking at the bio-fuel policy as they seek ways to reduce the budget deficit.

But, these numbers, especially corn, are indeed bullish for some agricultural related industries. As a drop in supply with more acreage set to be planted could be a boom for farm equipment manufacturers, fertilizer producers and food processers.

This is not only important for investors with agricultural exposure, it also must be taken in the context of what higher grain prices mean globally …

A lot of what is going on in the Middle East and North Africa started because of higher grain prices — and inflation. And in the long run higher prices could be the fuel that keeps the unrest going.  

We’ll continue to pay attention to the numbers and keep you informed.