Global Perspective | Big stocks spook US farmers

Global Perspective | Big stocks spook US farmers


Grains
The USDA has forecast spring wheat to be down about three per cent year-on-year.

The USDA has forecast spring wheat to be down about three per cent year-on-year.

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US farmers are expected to leave area idle or expand grazing areas due to challenging planting conditions, low prices and global market uncertainty.

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Ongoing uncertainty about global trade along with burdensome US stocks have spooked US farmers, with the latest US Department of Agriculture Grain Stocks and Prospective Planting reports delivering a few surprises for much of the trade.

Compared to USDA estimates of what will be planted and harvested in the US this year, the views of surveyed trading house fall wide of the mark.

Soybeans led the way in terms of surprises.

The USDA projected the 2019 plantings to be down by 4.6 million (five per cent year-on-year), to 84.6 million acres.

Plantings were expected to be lower this year, but this is very much on the low side of the range of trade estimates that had plantings pegged at between 84.3 million to 88 million acres.

There is potential for planted soybean acres to increase in the June report, as flooding and wet field conditions being experienced this US spring may push planting dates back which would favour more soybeans over corn, despite the low price outlook for soybeans.

Meanwhile, corn area surprised the trade by the extent of the increase in acres forecast.

While the trade was forecasting between 89.5 million and 92.7 million acres, the USDA puts 2019 corn acres at 92.8 million.

Farmers, particularly in the Dakotas, have swapped soybeans for more corn amid the particularly uncertain soybean outlook created by US-China trade war tensions. USDA stocks estimate, while three per cent lower than 12 months ago, also sits right at the top end of trade expectations.

Wheat surprised too.

The USDA's latest estimate of 45.8 million acres, is below the 45.9 million low side of trade estimates.

While USDA's winter wheat acres are about in line with trade expectations, spring wheat acres are the surprise.

The USDA has forecast spring wheat to be down about three per cent year-on-year, and almost four per cent below that of trade estimates.

Durum, in particular, came in at only 1.42 million acres compared to 2.07 million acres last year, and trade estimates of 2.04 million acres.

This puts it down more than 30 per cent year-on-year, and 30 per cent below trade expectations.

Despite corn acres expected to reach a three-year high in 2019, US principal crop plantings (corn, soybeans, wheat and cotton) as a total are forecast to decline again this year.

US farmers are expected to leave area idle or expand grazing areas due to challenging planting conditions, low prices and global market uncertainty.

The US-China trade war is acting as a catalyst of change to an already in-motion trend, where lower-cost suppliers have been challenging the competitiveness of the US.

Australia is facing the same challenge to the competitiveness of its grains supply.

And as we approach winter planting 2019, there is plenty to potentially spook Australian farmers too. We still await word from China regarding the initial findings of its investigation into the dumping of Australian barley in its market.

Similarly, the banning of Canadian canola from Chinese ports could be a boon or bad omen for Australian canola in what is an otherwise lacklustre global oilseed market.

With ongoing drought, however, an outlook for heavy stocks is not the problem for Australia's grain and oilseed sector... widespread general rains and a return to average seasonal conditions will be required before these potential spooks get legs down under. ​

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