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Morgan Stanley fuels doubts over US corn, soy sowings data

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So just how much corn and soybeans did US farmers sow this year?

Morgan Stanley stoked ideas grew that officials may be overstating estimates for US soybean and, in particular, corn sowings by on Monday underlining a lower estimate for plantings, an idea espoused by Informa Economics and broker Gulke Group too.

The US Department of Agriculture "could lower its official estimate [for corn sowings] by as much as 3.1m acres", Morgan Stanley said on Monday.

That would be "easily enough to pull stocks-to-use", a key metric for price determination in commodities, "below consensus expectations", the bank said.

The comments come amid a continuing debate over data last week from the official Farm Service Agency, which compiles statistics drawn from farmers' returns, suggesting that sowings were far smaller than the USDA has suggested.

Informa Economics late on Friday cut its estimate for US harvested area of soybeans to 1.2m acres below the USDA forecast.

For corn, Informa pegged harvested area 2.2m acres below the USDA estimate.


The FSA data showed area, on a planted basis, at 80.8m acres for soybeans and 84.8m acres for corn, respectively 4.0m acres and 6.8m acres below the USDA forecast.

Some shortfall in area is expected in the FSA data, given that it encompasses only farms required to certify for US government programmes.

However, even factoring in adjustments which have, historically, married FSA data closely to the USDA's estimates, which are the ones the market uses, leaves a huge disparity between the two sets of figures.

Research by Professor Darrel Good at the University of Illinois research shows that adding an extra 3.63% onto the FSA's September corn area figure, and 2.15% onto the soybean reading, has in the past given a decent approximation of where the USDA sowings forecast will end up for its final reading in January.

However, even that adjustment still leaves 2.3m acres of supposed soybean plantings, and 3.7m acres of corn seedings, unaccounted for.

'Dismiss the data at your peril'

Morgan Stanley, which has warned that investors "dismiss the latest [FSA] data at their peril", acknowledged that markets had done so nonetheless.

"Tuesday's data release was largely met with a yawn from the market, allowing rising yield estimates and a strengthening dollar to dominate price action," the bank said.

Nonetheless, brokers have cited several reasons to believe that the latest FSA data are merely an underestimate, and will be revived upwards significantly.

A major one is that prevent plant statistics - ie data on how many acres earmarked for corn and soybean went unseeded during an unusually wet spring - also released by the agency are not unduly high, which would be expected if weather had anything to do with depressing plantings.

Morgan Stanley acknowledged trouble refuting this point, adding that it was "difficult to envision" what had happened to the 3.8m acres sown with corn, soybeans, cotton or wheat last year which had not shown up this year, in seeding or prevent plant data.

'Unreported acres'

FSA hold-ups may account in part for the data shortfall, with the need to process an elevated number of livestock insurance claims holding up handling of the crop data.

Meanwhile, there is large support for the idea that growers may en masse this year failed to have certify acres, with only a small penalty for late registration.

"I feel there is a significant amount of unreported acres and the FSA date may not be real helpful until December," said Darrell Holaday at Kansas-based broker Country Futures, terming "generally worthless" last week's numbers.

"Do we agree that USDA corn acres will go down? Generally yes. But we certainly don't think they will drop 4m as was implied by the September FSA data."

In fact, Professor Darrel Good, author of the University of Illinois report on FSA acreage adjustments said that the agency's "folks in Illinois say there have been no unusual delays in farmers reporting acreage and no delays in FSA processing".

However, that "does not appear that is the case in all states, with some large gaps between September FSA numbers and [USDA] estimated acreage", he told

'Pure economics'

Still, there are some data that support the idea that the FSA data may be pretty accurate after all.

Broker Gulke Group – whose research of farmer plantings suggests corn and soybean plantings well below the USDA figures – flagged that the FSA sowings data for all crops come in at 674.82m acres.

That is only 10,000 acres short of the USDA total for 2013.

And crop prices for the 2013 spring planting season were broadly higher than this year, questioning whether growers would expand their sowings for this season.

"Gulke Group has always contended that pure economics of markets were giving the farmer a financial disincentive to plant corn and that trend looks to continue into the next crop year as well," the broker said.

Jerry Gulke, the Gulke Group president, added that the broker's downbeat acreage assessment as based on a model which has proved accurate in previous years.

"If you have a model that has worked well before, your starting point is to use it again," even if that may go contrary to what the market believes, he said.


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