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ADM, CF Industries back hefty downgrade to US corn sowings estimate

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Ideas of a large downgrade ahead to the US corn sowings estimate gained momentum as both Archer Daniels Midland and CF Industries backed ideas of area reaching its lowest potentially in 13 years.

 

Archer Daniels Midland – with Bunge, Cargill and Louis Dreyfus one of the “ABCD” of agricultural trading giants – said US corn acres appeared to have come at “the mid-80s” millions of acres this year, well below a US Department of Agriculture forecast of 91.7m acres.

 

“Our internal viewpoint is that the acreage will come down, particularly in corn, and so probably into the mid-80s, around that area there,” said Ray Young, the ADM chief financial officer.

 

“Acreage will come down on corn” from the current official estimate, he sold investors, although adding that “it may creep up a little bit on soybeans”, for which the USDA currently pegs domestic plantings this year at 80.0m acres.

 

Lowest since 2006?

Separately, CF Industries issued a similar corn area estimate, with Bert Frost, the nitrogen fertilizer group’s senior vice-president of sales, saying that “we believe that the US will have around 85m planted corn areas this year, much lower than anticipate heading into 2019.

 

“Our internal number is probably 84m, 85m [acres],” Mr Frost told investors.

 

The forecasts followed an estimate earlier this week from Nutrien, the potash-to-farm retail giant, of US corn sowings this year of 85m-87m acres.

 

A figure in the lower end of that range would be the lowest corn plantings number since the 78.3m-acre total recorded in 2006.

 

Yield debate

However, ideas on prospects for yield varies, with ADM’s Mr Young “we still believe that the current estimates of yields are probably reasonable at this point in time”.

 

“With the seed technologies and genetics, it’s amazing… what yields can be,” he said.

 

“Yields are probably be in line with the USDA numbers,” of 166.0 bushels per acre for corn, and 48.5 bushels per acre for soybeans.

 

But CF Industries’ Bert Frost said that “the USDA is still projecting a… much higher yield number than we think is possible.

 

“I think you’ll be lucky to be at 160” bushels per acre, he said, viewing that “late planting will lead to lower yield”.

 

At Nutrien, Chuck Magro said that the US was poised for “what will almost certainly be below trend yields”.

 

Stocks, price expectations

Nutrien highlighted that its forecasts suggested a tightening of corn supplies, with Jason Newton, the group’s head economist saying that “if you look in any of the scenarios, we’d expect to see a significant decrease in corn ending stocks and stocks-to-use ratio”.

 

CF’s Bert Frost said that “we expect ending corn stocks to be at their lowest levels since 2013”, adding that “it should take several years of higher corn acres to return to normal ending corn stocks”, a factor which implies support to prices.

 

Anthony Will, the CF chief executive, said: “Both corn price where it goes off the board this year after harvest and acres next year are going to be, in our opinion, stronger than where the market’s pegging it today.

 

Seedings to rebound in 2020?

Indeed, higher prices were poised to spur far larger US corn sowings in 2020, with Mr Magro saying that “with tighter supplies and improved prices, we see potential for around 95m acres of corn planted next year”.

 

Michael Frank, the head of Nutrien’s retail division, said: “There’s going to be more corn-on-corn., and so it’s easy to see 95-plus million acres setting up for 2020, especially with where commodity prices are today

 

CF’s Bert Frost said that “we’re bullish” on acres, saying that “I think 95m is a low end” forecast.

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