June 30 – Got Your Popcorn?

Get Your Popcorn

USDA Set to Report Acreage Report

Today the world changes.

At 12 p.m. EST, the USDA will unveil its monthly acreage report and a swath of related data.

Not only will we learn how many acres American farmers have planted, but we’ll also receive an update on the amount of grain and other commodities that were left on June 1.

Ahead of the report, soybeans are facing the most bearish sentiment. Thoughts of more bean acres than corn continue to float around. [1} Conversely, even the slightest bullish figure could push corn prices higher.

As discussed in yesterday’s FarmLead Breakfast Brief, the market is expecting the June 1 stocks numbers to be larger than a year ago. For corn, the projection is 5.123 billion bushels, an 8.7% increase year-over-year. For soybeans, pre-report expectations are set at 983 million bushels, a 12.7% jump over June 1, 2016. And for wheat, the bearishness is the most prevalent, with expectations for 16.5% more of the cereal in the U.S. than a year ago, or 1.14 billion bushels.

As we mentioned in Wednesday’s Breakfast Brief, the market is expecting to see 89.9M acres of corn, 89.75M acres of soybeans, and 46.1 million acres of total wheat. In the last five years, corn acreage has increased from the March report (this year, the expectation is that they’ll drop slightly). [1]

or soybeans, U.S. acreage numbers have risen from their March counterpart for the last eight consecutive years.

The trade isn’t expecting too much change from the March forecasts, at least not publicly. Not too many market soothsayers are willing to go out on a limb. At this point, crop prices could go in either direction.

One player who has been ultra-bullish has been Stewart-Peterson.

The firm is happy to point out that the June stocks and acreage report are the third-most volatile report of the year for soybeans. [2]

For corn, it’s #1.

Further, the average daily change (either up or down) for the June 30th report is 15¢ / bushel for corn and 22¢ / bushel for soybeans.

Many people will argue that the market is currently pricing in about 90 million acres of corn and soybeans each. The challenge is pricing in the weather conditions as corn starts to pollinate and beans begin to pod. Spring and Durum wheat are now hitting their key growth stage.

Still, it’s too early. Fully-developed heads don’t have anything to them (i.e. protein or other important nutritional factors), which is why things are just getting baled up.

Some have argued that corn and soybeans haven’t seen their actual summer rally yet.[3] Thanks to this year’s later planting season, crop development has been pushed back by a week or two, depending on the area. With funds still holding significant short positions in both corn and soybeans, market analyst Elaine Kub thinks that short covering could be “explosive.”

Needless to say, the bulls are hoping that the weather market entertainment is just starting up.

The Wheat Rally Continues

I’d be remiss not to mention spring wheat.

The September new crop contract touched $7.68 USD / bushel yesterday before pulling back a bit. This was the largest one-day shift in spring wheat prices since 2010. The last week of wheat action has been exciting to watch on both the futures board and the FarmLead Marketplace (You think the futures board is the only place where grain deals get done?)

Two factors egged on spring wheat action Thursday.

First, the StatsCan report showed a drop in Canadian spring wheat acreage. Technically, we knew wheat acres are down. Therefore, we shouldn’t have seen that much of a bullish reaction.

However, the second factor was yesterday’s update to the U.S. Drought Monitor.

The update showed worsening conditions in the Northern Plains [4]. Roughly 90% of the Dakotas are facing severe or extreme drought conditions. In the long-term forecast, the Northern and Western Plains will face excessive heat from July 6 to July 15. [5]

For the month of June, Chicago wheat futures are up 18%, and Kansas City wheat is up 13%, driven mainly by a poorer quality U.S. harvest. Currently, May 2018 KC wheat futures are above $5.50 USD / bushel, its highest in two years. Winter wheat gains have been supported by the spring wheat rally though. The September spring wheat market started June at $5.76 USD / bushel and that $7.68 reached yesterday would be a 33% gain for the month.

The hot action in spring wheat is likely being augmented by the number of players in the game.

The Financial Times explains that since May, “the number of hedge funds trading spring wheat futures and options has double.”[6] Further, monthly exchange volume in June is the second-highest ever at more than 400,000 contracts. By comparison, Chicago wheat is still the winner for volume, trading 2.5M contracts in May.

Look For A Recap at 12 EST

Finally, I’m proud to introduce one of our newest FarmLead team members, Garrett Baldwin.

Garrett is a talented writer who brings a wealth of knowledge in markets. His Masters in Agricultural Economics from Purdue University amplifies his expertise in the grain complex.

After the U.S.D.A.’s stocks and acreage report, you’ll be able to find Garrett’s recap on the FarmLead Insights blog, found here.

I’m biased, but I think you should bookmark that link as Garrett’s insights on a variety of topics affecting grain markets and the broader agriculture market will be featured there regularly starting today.

To Growth,

Brennan Turner
President/CEO | FarmLead
1-855-332-7653 (Toll-Free)
www.FarmLead.com
@FarmLead (on Twitter)

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.

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