March 12, 2018

USDA RELEASES FIRST ACREAGE ESTIMATES FOR 2018

Each year in late February, the USDA “Ag Outlook Forum” is held in Washington, DC. The Ag Outlook Forum is usually the first USDA projection for expected crop acreage for the coming growing season, as well as other current economic conditions in the agriculture industry. The latest Forum projected similar levels of both U.S. corn and soybean acreage for 2018, as compared to 2017 acreage, as well as forecasting the continuation modest price levels and tight profit margins for the coming year.

Following are the USDA Ag Outlook Forum for 2018 U.S. crop acreage, yield, production, and price projections for the major U.S. crops ……

• Total — U.S. acreage planted to the four major crops in 2018, which are corn, soybeans, wheat and cotton, is estimated at 239.8 million acres, which is an increase of 900,000 acres compared to 2017. Last year, the planted acreage of the four major crops ended up over 3 million acres higher than the initial USDA projections in February.
• Corn — U.S. corn acreage is estimated at 90 million acres for 2018, which is similar to the 2017 planted corn acreage of 90.2 million acres, but is well below the 94 million planted acres in 2016. USDA is projecting a trend line corn yield of 174 bushels per acre in 2018, which would result in an estimated total U.S. corn production of nearly 14.4 billion bushels. The U.S. average corn yield has exceeded the expected trend line yield in both 2016 and 2017. USDA estimated the 2018-19 corn ending stocks at 2.27 billion bushels, with a market-year average (MYA) price of $3.40 per bushel. This compares to the current estimated 2017-18 corn ending stocks of nearly 2.13 billion bushels, and a projected average MYA price of $3.35 per bushel.
• Soybeans — 2017 U.S. soybean acreage is also expected to be 90 million acres, which is similar to the 2017 soybean acreage of 90.1 million acres, but is a substantial increase from 83.4 million acres in 2016. USDA is estimating the 2018 trend line soybean yield at 48.5 bushels per acre, which would be below the record U.S. soybean yield of 52 bushels per acre in 2016, and the 2017 average soybean yield of 49.1 bushels per acre. Total 2018 U.S. soybean production is projected to exceed 4.3 billion bushels, with an estimated 460 million bushels of ending stocks and an average MYA soybean price of $9.25 for 2018-19 marketing year compared to $9.30 per bushel for the 2017-18 marketing year
• Wheat — U.S. wheat acreage in 2018 is projected to be 46.5 million acres, and is just above the 46 million planted wheat acres in 2017, which was the lowest level in the previous six years. USDA is estimating the 2018 U.S. wheat yield at 47.4 bushels per acre, with a total production of nearly 1.84 billion bushels, which compares to a wheat yield of 46.3 bushels per acre and a total production of just over 1.74 billion bushels in 2017. USDA is projecting an average MYA price of $4.70 per bushel for the 2018-19 marketing year.
• Cotton — U.S. cotton acreage for 2018 is estimated at 13.3 million acres, which is an increase of approximately 15 percent from the 11.5 million acres in 2017. The 2018 acreage is considerably higher than the 10.1 million planted acres in 2016, or 8.6 million acres in 2015.

Most grain market analysts have been predicting 2018 crop acreage totals similar to the USDA acreage projections, with approximately 90 million planted acres for both corn and soybeans. The analysts expect this scenario to put some market pressure on corn and soybean prices in the coming months, particularly if we get favorable growing conditions. On the other hand, the reduced 2018 acreage for wheat could create some pricing opportunities in future months for the 2018 crop, especially if there are any production challenges. Besides the monthly USDA Supply and Demand Reports, the next important USDA crop data will occur with the USDA “Planting Intentions Report” on March 31.

USDA Livestock Forecast ……

USDA also releases projections for livestock production and estimated price levels for the coming year. Here are the livestock projections from the latest Ag Outlook Conference ……

• Cattle — USDA is projecting total 2018 U.S. beef production at 27.7 billion pounds, which would be a 5.9 percent increase over 2017. Export levels are expected to reach 3 billion pounds in 2018, which would be an increase of 5.7 percent from 2017. USDA is estimating the average fed cattle market price for 2018 in a range of $116 to $123 per hundredweight, which would be slightly below the 2017 average price of $122.72 per hundredweight (cwt).

• Hogs — USDA is projecting total U.S. pork production for 2018 at the record level of 26.9 billion pounds, which would be 5.9 percent above the 2017 production level. The good news is that pork exports in 2018 are also expected to increase by nearly 5 percent in 2018 to about 5.9 billion pounds. USDA is estimating 2018 average hog market prices in a range from $47 to $49 per cwt., which is below the average hog price of $50.48 per cwt. in 2017.

• Dairy — USDA is projecting total U.S. dairy production for 2018 to increase slightly from 2017 levels, reaching a record level of 218.7 billion pounds. Dairy cow numbers are similar to a year earlier, but milk production per cow continues to increase. The bad news for dairy producers is that USDA is expecting 2018 milk prices to be in a range of $15.70 to $16.40 per cwt., which is a decline from the average milk price of $17.63 per cwt. in 2017.

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Note — For additional information contact Kent Thiesse, Farm Management Analyst and Senior

Vice President, MinnStar Bank, Lake Crystal, MN. (Phone — (507) 381-7960);

E-mail — (kent.thiesse@minnstarbank.com)