When Brennan said that everyone should grab their popcorn this morning ahead of the USDA reports, he wasn’t kidding.
Though the rains are just starting here in Chicago, the wheat markets heated up immediately, while temperatures rose under the collars of corn traders.
Here’s the skinny on the USDA’s acreage report.
- Corn: The USDA said farmers planted far more corn than analysts had expected. The USDA said that we’re looking at about 90.88 million acres. That’s about 100,000 more acres than March estimates. It doesn’t seem like much, but it was enough to push corn prices into the red. Last year, corn acreage came in a 94.0 million.
- Soybeans: Farmers planted less than what was forecasted, but expectations had been muted before trading begin in Chicago. The USDA estimated planting acreage around 89.5 million, which is nearly a million acres less than March forecasts of 89.5 million. The figure is still higher than the 83.4 million acres planted in 2016, but that didn’t stop soy prices from kicking up more than $0.20 in the minutes after the report release.
- Wheat: Another day, another rally. The USDA says that its March estimates were well below current planting estimates. The report said that farmers planted 45.65 million acres, down about 400,000 acres from its previous estimate. That figure takes nearly five million acres off of last years wheat acreage. So, it’s no surprise that the “rocket ship” that FarmLead CEO Brennan Turner referenced recently is the ideal metaphor for prices. Up in Minneapolis, we saw wheat futures jump as high as 7.2%. In Chicago, soft red winter futures jumped to the Chicago Board of Trade’s 30-cent limit. Prices topped out at $5.26 per bushel before retreating slightly. The September futures contract was up about 5.5% at 12:30 CST.
The USDA also released its grain stocks report for June 1. We’ve seen an uptick in stored corn, soy, and wheat over the last year.
- Corn: Stocks hit 5.225 billion bushels, topping consensus analyst expectations of 5.12 billion. That’s a big uptick from the 4.71 billion in 2016.
- Soy: The USDA said we’re looking at about 963 million bushels in storage. That’s below the consensus estimate of 983 million. Last year we had about 872 million bushels in storage.
- Wheat: USDA estimated 1.184 billion bushels in storage at the start of the month. That’s above the consensus of 1.137 billion bushels, and last year’s figure of 976 million.
This is traditionally one of the most volatile trading days of the year.
Wheat is obviously drawing the biggest headlines today after the price rally.
As stated, total wheat planting came in at 45.6 million acres. Not only is this a 9% decline from last year, but it is also the lowest acreage total since the agency started collecting the data in 1919. Here’s the breakdown of wheat:
- Winter Wheat: The 2017 planting acreage fell 9% to 32.8 million. Roughly 23.8 million acres are Hard Red Winter, 5.6 million acres are for Soft Red Winter, and 3.42 millions acres are for growing White Winter.
- Spring Wheat: A 6% decline in acreage left totals at 10.9 million.
- Durum: We saw a 20% decline in acreage compared to 2016, Overall, durum acreage came in at 1.92 million.
The combination of spring and durum wheat was well below expectations. Combined, we saw the two miss estimates by roughly 390,000 acres. That’s about a 3% miss from estimates for the two categories combined. This explains why we saw prices in Minneapolis pop to close out the week, month, and second quarter.
Before the report came out, wheat was already on the move because of weather events and a report from Statistics Canada about the state of the crop. The hot weather across the northern Plains has been hurting quality and expectations. Two-thirds of the state is facing drought conditions, compared to the 1% we saw last year.
Statistics Canada said that all-wheat plantings, including winter, durum and spring varieties, is off roughly 4% compared to last year.
How significant is this downturn? Put it this way, it’s the first time ever that canola plantings have topped wheat plantings since anyone started recording the data.
The sighing sound you might have heard collectively came from corn farmers, who ended up disappointed by today’s report.
There had been a lot of expectations for this acreage report. Many analysts had been saying that soy acreage was set to top corn acreage for the first time since 1983.
For now, corn remains king.
We’ll now wait until September for the next estimates.
The upcoming week features two significant holidays that will disrupt business as usual. Tomorrow’s Canada Day celebrates the 150th anniversary of the country. The country will observe the holiday on Monday. On Tuesday, the U.S. celebrates Independence Day, so markets will be closed.
The volatility hitting the market today may spill over to Monday’s early trading here in the United States. “The machines” that caused last week’s sharp downturn in coffee, sugar, and cocoa markets will likely be hard at work on Monday morning searching for any value they can find. Monday may get off to a bit of a crazy start, before an early close here in Chicago.
Over the weekend, the focus won’t be on the ground beneath farmers’ feet, but above them. We’re expecting rain across the Midwest, and there’s a 100% chance of rain in Indiana. Despite hail and rains in Nebraska and Iowa, the gulf stream just doesn’t seem interested in pushing the badly needed rain up into the Dakotas. North Dakota is facing extreme heat next week – with forecasts calling for temperatures above 100 degrees.
Finally, one of the most exciting things about FarmLead since my arrival has been the launch of the Basis Negotiation feature.
Starting this weekend and all next week, we’ll be diving into the benefits of basis trading for buyers and sellers in today’s market.
We’ll also be building a simple series of stories to help FarmLead users navigate the feature.
In addition, check back in after the close of daily trading. We’ll cover trading from here in Chicago.