One of the top U.S. Department of Agriculture reports for the entire year is coming to town March 31, and all of the market news is affected by the twist we put on the report.
Corn futures gained last week, and added a good gain March 27. This is being termed a “recovery,” as it reverses some of the losses of the last two weeks. However, the gains came after volatile swings that saw some chart damage in both directions.
The May contract on the Chicago Board of trade managed a new high for the month, but the December new crop contract made the lowest trade since late July before recovering March 24. May futures managed a gain of almost nine cents, but December actually declined a penny. The March 27 market saw a gain of five and a quarter cents, while the December was up nine and a half cents.
Drop in soybeans
The soybeans raised some eyebrows with declining prices. The November contract set the pace, with the finish to 13 consecutive lower closes until the March 26 close. That is the longest new crop break in prices since 1973. Not the kind of record we want to see!
The May contract had a range of over $1.33 a bushel to the low of $14.05. The November futures lost $1.39 over the same period. The trading March 27 was very positive for soybeans, with the May futures up 14 cents, and the November up 15 1/4 cents.
So, as I mentioned last week, the farmers were shooting for $7 corn and $16 beans, and we are now a long way away from those psychological levels. At the same time, we are seeing lower markets; with now a little rally back, there are solid fundamental reasons why these prices seem too low.
A look at the USDA balance sheets has us wondering. The supply is tight, and these prices don’t seem high any more. The Planting Intentions report that comes out March 31 is based on farmer surveys. At this point, it is not believed there will be any early planting to distort them.
Although Ohio has had mild weather, with snow coming and going, much of corn country has had snow cover all winter and will already need a warm spring to get field work moving.
Northern climates have farmers who are already realistic about planting some corn in June because of record snow pack. The good news is, there is not much frost in the ground because of the insulating effect of the snow, so a lot of moisture will be absorbed to build soil moisture instead of creating river bottom flooding.
Analysts are putting out private estimates of the USDA Planting Intentions. Of course, the big game here is not guessing the actual planted acres, just guessing what USDA will report, so that they can get positioned ahead of March 31. This may, in fact, be why prices were off the last couple of weeks, and why they are starting to turn around.
Expect that the market maneuvers will come early in the week and slow trading will evolve March 30 and even March 29. There are a lot of opinions about the numbers to come.
First, the grain stocks are expected to reflect a supply that is smaller than at this time last year. The trade average guess comes in at 7.473 billion bushels of corn still on hand. That compares to the 7.758 we had left last year.
The crop year ends Aug. 31, and the report will be for the stocks on hand March 1, 2023. Thus, the report is for the last six months of the reported year.
Soybean stocks are expected to be reported at 1.728 billion bushels. The range of guesses is from 1.61 billion to 1.91 billion. We had 1.932 last year, so we are expected to be significantly short of that.
It is the acreage estimate that can stir up the markets. At the USDA Outlook Forum, Uncle Sugar reported an expected 91 million acres. The trade is now expecting 90.9, not much change, but the range of estimates is from 87.7 to 92.3 million acres. That leaves a lot of room for market action if one of the extremes is correct.
At the Outlook Forum, soybean acres were estimated at 87.5 million. The trade is expecting a report of 88.3 million acres, on a range of guesses of 87.4 to 89.6. Again, there is room for excitement if the average pre-report estimate is wrong.
It is in the soybean acres that many think we can see changes. As I have mentioned several times, there is still coming the full realization of the possibility of abandonment of wheat acres. Plains wheat was planted in very dry conditions, and the fear is that stands will be poor where there was no germination.
Soybeans may be planted on abandoned acres, where there is rain enough. Farther north in spring wheat country, soybeans may be substituted merely because the price is relatively better. March 31 will be a significant day for our markets.
Seasonally, from here on, we have just a few general market movers. They are spring planting progress, May and June weather and unseen geophysical events to come.
Last year, the market mover was the Ukraine War. That could return, in the form of reduced exports from that region. Or, something else could come up.
Remember, as that great grain guru Gilda Radner once said: “It’s always something!”
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