You’ve seen the headlines and heard the news about last Friday’s USDA Planted Acreage report: more corn acres than expected, fewer bean acres than expected. So what are the implications?

Corn planted acreage is estimated at 92.9 million acres, a three percent increase above the USDA’s projected planting intentions reported in March says Melvin Brees at the University of Missouri; who notes that it would be an historically large crop. Brees says that is more than one million acres above the pre-report traded range of estimates from 82.9 to 91.7 million acres. “It is the largest corn planted acreage since 1944 and the estimated 85.4 harvested acreage would be the largest since 1933!” At Purdue Outlook Specialist Chris Hurt also put the historical aspect into perspective, “The increase in the nation’s corn acres from 2006 now stands at 14.6 million acres, the largest shift in planted acres since the 1983 “Payment In-Kind” reduction and subsequent expansion in corn acres in 1984.”

Although the acreage caught the market by surprise to some extent, Purdue’s Hurt says blame the $1 decline in markets on the wetter weather in the Eastern Cornbelt and the improved crop prospects. “My estimates of national yield based upon the June 25th Crop Progress report are for 149.8, just ½ bushel under normal yields. With some improvement expected in the Crop Progress report on July 2, this would raise the expected crop to over 12.8 billion bushels. With a few more rains, talk of a 13 billion bushel crop may soon begin.” But he says weather for the balance of the season is still important. However, with strong demand, prices should remain strong. “Given current conditions we will expect cash prices of corn at harvest to be in the $3.00 to $3.20 range per bushel at cash markets. Again at this point, prospects for storage returns look favorable, so plan on corn storage for those amounts that have not been forward contracted for harvest delivery. Storage returns should be encouraging with prices into winter and spring of 2008 moving toward the $3.50 to $3.70 range.”

Soybean acreage is down 15 percent from last year’s 75.5 million acres to just under 64.1 million acres in 2007, says Missouri’s Melvin Brees. “This estimate is nearly two million acres below the bottom of the pre-report trade estimated range of 66.0 to 69.0 million acres and a decrease from the intended acreage reported in March. Reductions from last year in soybean plantings of more than one million acres occurred in the Corn Belt states of Iowa, Illinois, Indiana, Minnesota and Nebraska.”

Purdue’s Hurt says the soybean estimate was a bigger surprise than the corn estimate. “Most had assumed more soybean acres were going to be planted because of the large movement to double crop and because of wheat acres that were thought to have been destroyed by the Easter weekend freeze and replanted to soybeans. USDA reports that 8% of the soybean acres are double-dropped this year compared to 5% last year. This amounts to 5.1 million acres compared to about 3.8 million acres in double-crop last year. This higher level of double-crop would reduce the national yield potential in the range of .3 to .5 bushels per acre.” Based on current growing conditions, Hurt says the crop would yield about 42 bushels per acre nationally, and with less acreage, carryout drops, “A 42 bushel per acre yield with the reduced soybean acres would provide a crop about 2.66 billion bushels which is 80 million bushels lower than the previous USDA estimate. Ending stocks for the 2007/08 marketing year would drop to about 250 million bushels, compared to USDA’s current estimate of 320 million bushels. USDA‘s June estimate was for 2007 crop bean prices to average $7.15 per bushel. That will likely be increased to $7.40 or $7.50 in the July 12th update.”

If you still have beans on storage, do you wait for prices to reach the “teens” or do you begin selling, and rewarding the market for a second chance? Hurt says, “Old crop soybeans are abundant (huge stocks levels) and basis will be weak. Current bids provide a surprising high price opportunity to finish up sales. For the new-crop, bids are near $1.00 per bushel higher than my anticipated harvest level prices and thus provide strong incentives for adding to new crop sales as well.”

Summary:
Corn acres were much larger than expected, but so is the demand for corn. While the increased acreage may keep prices from going much higher, prices will still stay in the $3 range, and provide good marketing opportunities for producers with storage. Bean acreage was smaller than expected in the USDA report, and continued demand will keep prices strong while the carryover declines and the end of next summer. There are plenty of beans to go around now, weakening the basis, but prices are still profitable for those rewarding the market.