USDA report bearish for corn, acreage decrease bullish on beans

By Jon Scheve, Superior Feed Ingredients, LLC

While the USDA report last week was bearish corn, the 4 million acre decrease in beans from the March planting intentions was bullish.  Plus, old crop stocks were adjusted down slightly too.  Both of these factors contributed to the $1.20 rally last Friday and this previous Monday. However, by the end of the week beans had pulled back over 70 cents but are still up 50 cents from just prior to the report.

Following provides some report highlights for beans.

Harvested vs Planted Acres

Like corn, the USDA’s estimated harvest rate more closely resembles 2013 to 2017 versus the lower rate from 2018 to 2022.  Considering bean’s higher value this year though, the increased harvest rate may end up being more accurate.  If the average from the last five years is used, carryout would decrease by 10% and likely send prices higher over time.

Crush and Exports

It seems likely the USDA’s crush estimate from the last report will stay consistent.  However, the export market could become more volatile.  With Brazil’s crop 30% bigger than the US this year, competition will be fierce.  But if US yields also drop, the market will need to rally significantly to ration US export demand. 

Projecting Carryout and Prices

The chart below summarizes the USDA categories that have the most impact on prices.  I have also included my “Futures Projections” based on various national yield averages.   The 2023-2024 carryout estimates assume the USDA does not change demand much in the July report.

A 100-million-bushel carryout is basically like the US being “out of beans” and could force a rally above $17. 

Moving forward, August weather will dictate bean prices.  However, normal yields or China slowing down on buying would limit any price rallies.  Also, if US prices are too high, Brazil beans may get imported into the US over the next year.

Bottomline:

The report may keep beans from retesting the lows from last month.  Looking ahead, if August weather is too dry, there will likely be demand rationing through price rallies.  On the flip side, if weather is perfect and yields are above trendline, then there is potential downside risk.  Either way, without an increase in export demand, a bean rally could be limited.


Please email jon@superiorfeed.com with any questions or to learn more. Jon grew up raising corn and soybeans on a farm near Beatrice, Neb. Upon graduation from The University of Nebraska in Lincoln, he became a grain merchandiser and has been trading corn, soybeans and other grains for the last 18 years, building relationships with end-users in the process. After successfully marketing his father’s grain and getting his MBA, 10 years ago he started helping farmer clients market their grain based upon his principals of farmer education, reducing risk, understanding storage potential and using basis strategy to maximize individual farm operation profits. A big believer in farmer education of futures trading, Jon writes a weekly commentary to farmers interested in learning more and growing their farm operations.

Trading of futures, options, swaps and other derivatives is risky and is not suitable for all persons. All of these investment products are leveraged, and you can lose more than your initial deposit. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful, and in accordance with applicable laws and regulations in such jurisdiction. The information provided here should not be relied upon as a substitute for independent research before making your investment decisions. Superior Feed Ingredients, LLC is merely providing this information for your general information and the information does not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision. The contents of this communication and any attachments are for informational purposes only and under no circumstances should they be construed as an offer to buy or sell, or a solicitation to buy or sell any future, option, swap or other derivative. The sources for the information and any opinions in this communication are believed to be reliable, but Superior Feed Ingredients, LLC does not warrant or guarantee the accuracy of such information or opinions. Superior Feed Ingredients, LLC and its principals and employees may take positions different from any positions described in this communication. Past results are not necessarily indicative of future results.

Check Also

Ohio Ag Net Podcast | Ep. 353 | The Farm Bill Standstill

In this week’s podcast, hosts Matt Reese and Dusty Sonnenberg delve into the progress (or …

Leave a Reply

Your email address will not be published. Required fields are marked *