Today’s USDA report showed that U.S. farmers planted 94.188 million acres of corn and 83.688 million acres of soybeans. Corn acres were higher than expected as they went up when the trade was looking for a lower number. The higher corn acres number is a bearish surprise. It shows that the U.S. farmers’ love affair with corn continues. Soybean acres while up, were less than expected.
Prior to the report corn was down 4 cents, soybeans were down 12 cents and wheat was down 1 cent. Soybeans had a huge range shortly after the report as they moved over 30 cents in less than 2 minutes. We are seeing lots of price volatility and price ranges with grains today.
Today’s report is providing end users of corn to get coverage in places they had not expected two weeks ago. At one time corn was down about 17 cents. Thirty minutes into the report we are seeing corn still lower on the day but down just 7 cents. Soybeans at that same time were up 42 cents, and wheat was up 4 cents.
If you want to sum up the market drivers for the rest of the summer, it will be these two words, “weather” and “demand.” Weather is always changing. Some will receive perfect weather this growing season, others will not. Demand continues strong for soybeans as the past few weeks have seen export sales for both old and new soybeans. Some are already reporting that the U.S. in August will export at least double of what is normally flowing out of U.S. export facilities.
Today brings a potentially very volatile USDA report day. Today USDA will provide their estimate of quarterly grain stocks as of June 1st. Traders are looking for grain stocks to be above that of a year ago. No big surprise there.
In addition, USDA will also provide a report of planted acres for corn, soybeans, wheat, and other crops planted in the U.S. It is that report that looks to bring lots of price volatility to the grains today. This report will be compared to numbers USDA released with the March 31 planting intentions report. That report was a big bearish surprise to the markets when USDA estimated at 2016 corn acres at 93.6 million acres, up from last year’s 88 million acres. Soybean acres in March were estimated at 82.24 million acres, down from 2015 at 82.65 million acres. That lower number in March was a surprise with all of the talk during the winter of low prices and negative returns per acre for both corn and soybeans, and corn seeing the biggest negative return at that time.
Soybean stocks as of June 1 were 869 million bushels and above the trade estimate of 829 million bushels. Corn stocks were 4.722 billion bushels while the trade estimate was 4.528 billion bushels. Wheat stocks were 981 million bushels nearly matching to the tick the trade estimate of 982 million bushels.
If you make the assumption that stocks will be higher than last year, then the area of most surprise and or the potential for the most surprise will be with acres. Corn acres will be compared to the March estimate of 93.6 million acres. Trade estimates range from 92-94 million acres with an average trade estimate of 92.9 million acres. The likely assumption is that corn acres will be lowered. It is just a matter of how much. The biggest surprise area has to be with soybean acres. Trader estimates for soybeans ranged from 82.1 to 85.7 million acres with 83.83 million acres the average trade estimate. The March estimate for soybean acres was 82.24 million acres.
Weather continues to dominate the news as rains have come at somewhat regular intervals across much of the Midwest this past month. It is the time of year when you can easily get lost in all of the weather reports that come out in a week’s time. Maps are updated every six hours. In the mix of weather discussion comes this — is the forecast based on the American model or the European model? In dry periods the European model tends to be the more accurate of the two.
Corn in Ohio and the Midwest is already starting the pollination process. The next two weeks for much of the Midwest will be very critical in determining corn yields. Earlier this month the driest parts of the Midwest included southern Illinois, Indiana, Ohio, Missouri, and Michigan. Central and southern Ohio did receive weekend rains that ranged from trace amounts all the way to two inches or more. Much of that area did see anywhere from .5 to 1 inch of rain. Meanwhile, much of northern Ohio did miss those rains. Plants were already showing stresses with corn leaves curling this week.
Producers earlier this month had the opportunity to get corn priced above the $4 mark. It was a level they had not expected during the winter or spring. December CBOT corn peaked earlier this month on June 17 at $4.49. That rally enabled many producers to get corn priced above earlier expectations. Bottom line is that corn returns per acre are better than many had expected. In the past two weeks it has dropped to the $3.78 area that was reached earlier today and puts fall delivery corn near the $3.50 level across much of Ohio. Soybeans, like corn, have moved higher than earlier expected. Earlier this month soybeans were higher for eight straight weeks in a row beginning in late April. November CBOT soybeans peaked earlier this month at $11.86 on June 13. In the past week with weekend rains and fund liquidation they had fallen to $10.73.
Some might be surprised by the strength seen in soybeans. Time will tell if they can hold the lofty gains seen after the report.
Don’t be surprised to see lots of price volatility the next month and especially the next week. The July 4th holiday is on Monday and the markets will be closed that day. Next Tuesday will be a most interesting day depending upon the weekend weather. Cinch that belt tighter as you ride the roller coaster of price volatility for grains. Any kind of hot and dry weather in the next month could easily see corn re-testing the highs made earlier this month.