March 28, 2024

Market turns focus to weather after USDA reports

MINNEAPOLIS — The corn and soybean planted acreage estimates sparked rallies in the commodity markets when the numbers were released June 30 by the U.S. Department of Agriculture.

The survey-based planted acreage report along with the quarterly grain stocks estimates released at the same time both provided bull fodder for the markets and the data was broken down by Brian Basting, Advance Trading research analyst, in a Minneapolis Grain Exchange-hosted conference call.

What was the surprise on the soybean acreage side?

The soybean acreage the USDA estimated today was fractionally lower by about 45,000 acres compared to the March prospective planting estimate. USDA forecasted 87.6 million acres in March and 87.55 million acres was estimated in June. That was a big surprise.

The trade was looking for soybean acreage to jump to 89 million — about a 1.4 million acre increase — but it was fractionally lower and soybeans were sharply higher (after the report’s release).

The corn acreage report also sparked a market rally after its release, right?

Corn at 92.7 million acres was about 1.1 million acres below the average trade estimate of 93.8 million. It was higher than what the USDA estimated back in March of 91.1 million acres, but the trade was looking for more than 1 million acres more than that, about a 2.7 million acre increase compared to the 1.6 million acre increase we saw.

What were the moving pieces on the wheat acreage side, based on geography and type of wheat?

In March USDA forecast hard red spring wheat at 10.9 million acres and that was reduced to 10.8 million in this report. The acreage report was a little bit of a bearish surprise for spring wheat.

Most in the trade were looking for a significantly lower number, anywhere from 300,000 to maybe 500,000 few acres of spring wheat in favor of soybeans and corn in the northern Plains due to more profitably economic incentive, particularly at planting time for those crops compared to hard red spring.

The USDA surprised the trade in that North Dakota planted acreage of hard red spring wheat was 350,000 acres higher in this report. So, not sure what to read into that other than the USDA numbers from this point forward will be taken as the given numbers. It is a survey-based projection done in the first two weeks of June.

Having said that, we’re in the midst of a drought, we understand that, and it’s going to be a significant cutback on yields unfortunately compared to previous years. The weather is going to move front and center here for hard red spring wheat moving forward.

Even in the midst of the higher acreage we still have some serious losses for growers up in that region due to the drought, particularly as we move west into western parts of North Dakota, parts eastern Montana are suffering right now from severe drought. Whether or not that can be salvaged with some rain the next couple of weeks remains to be seen.

The winter wheat harvested acreage, those crops are being harvested down in the central Plains, hard red winter crop, and the soft red winter crop is being harvested as we speak in the Midwest. Those acreage numbers were increased about 800,000 acres from what it was from the USDA earlier in June.

So, perhaps we have some larger crops factored in there for HRW and SRW than we thought a couple of weeks ago. Obviously, now the combine will tell the results as far as what these yields are.

With higher corn prices, what is the outlook for more wheat feeding in the next few months based on the quarterly stocks numbers?

The stocks report was primarily neutral for wheat, corn and soybeans. The June 1 wheat stocks of 844 million bushels were a little bit below expectations.

It implies basically that we’ve fed a little more wheat during that March-April-May quarter and that would probably be directly linked to that strong rally we saw in corn prices during the spring. So, we did see some producers continue to take advantage of the wheat economics, feeding more wheat.

We would look for the continuation of wheat feeding as a substitute for corn during the summer quarter, particularly in the wake of today’s sharp rally in the corn futures and the wheat/corn spread still favoring wheat feeding. We’re looking at some really attractive wheat feeding economics.

Now that these numbers are out, what do you see going forward for the markets?

Obviously the window for planting corn is now closed. The one window that still remains open for soybeans as far as planted acres would be the double-crop soybeans which I think would now be a strong incentive for those producers in the Midwest and maybe parts of Kansas, for example, to consider planting double-crop soybeans after the wheat harvest is complete.

In terms of market action, in my opinion this is just more of a recipe for market volatility as we near the critical pollination stage for corn across the Midwest.

Growers in the northern Plains are really struggling with moisture and in contrast to the Midwest where we actually got too much rain in some areas.

There were ample supplies of moisture across Illinois, Indiana, Ohio, Michigan, Missouri, Kansas, most of Iowa, but there is still some significant dryness in parts of western Minnesota, South Dakota, North Dakota, parts of Nebraska and parts of Kansas.

Needless to say we’re in the midst of a weather market now as we put these USDA acreage and stocks numbers behind us and we’ll look for continue volatility potentially all the way through Labor Day as we figure out the size of these 2021 crops, not only here in the U.S., but in referring back to the spring wheat crops, also into Canada.

It’s pretty critical to see what this Canadian Prairie spring wheat crop looks like, as well as spring wheat crops in Russia and spring wheat crops in Kazakhstan will be important.

Tom Doran

Tom C. Doran

Field Editor