The U.S. Department of Agriculture’s March 31 Prospective Plantings report rarely satisfies everyone, and the latest release is proof of that.
The soybeans have made new highs, helped by an acreage estimate lower than expected for the coming year. Corn, however, has crashed with the news that the corn acres will be wildly higher than expected.
USDA estimates that U.S. farmers will plant 93.6 million acres of corn. That is staggeringly high, and nearly 4 million acres higher than their previous estimate of just under 90 million.
If planted, we are headed for another record crop and carryout even higher than the previous estimate of just under 2 billion bushels.
The good news in the report was that the bean acres would be 82.2 million. That was significantly lower than the previous USDA estimate of 83.057 million acres, and helps the carryout move lower.
In trading before the report, both corn and beans had moved to their recent highs. After the report, the soybeans continued higher, eventually.
I say eventually, because November soybeans actually dropped to $9.10 at one point, before closing at $9.24-3⁄4.
The gains were on Friday and Monday, after the report, and after consideration of what the numbers really meant. The day just after the report, (April 1) grains were negative, following the corn plunge.
Corn prices were more direct. The big crash was right after the noon E.S.T report, although there was some recovery the next two sessions. We equaled the February high of $3.74 May futures ahead of the report, then dropped over 26 cents to a low of $3.47-1⁄2.
The close of $3.51-1⁄2 Thursday was helpful, but not really encouraging. Currently on this April 5 morning, we are trading $3.54-1⁄4, down a quarter for the day.
Defining the market
It goes without saying (that is actually not true, since I am in the process of saying it) that the planting intentions report tends to define the market for some time to come. It is generally pretty accurate, although traders are right now tearing it apart to see how we could increase corn acres that much. There is also the question of why farmers would plant corn in preference to beans.
One would expect that $8.75 cash new crop beans at the processor would look better than $3.18 corn at the elevator. The problem with this reasoning is that, first, USDA is usually accurate, and second, that we have a long way to go to get the acres planted.
It is true that, given good weather early, we tend to end up with extra corn acres. Given a delay in planting, we sometimes over plant the bean acres. And, right now we have no idea how the spring will progress.
So, that leaves us with the obvious choice that we have a good opportunity to sell soybeans. The experts we pay to advise us all have been telling us to sell if November soybeans get above $9.
It does not sound like a great price, but it is a realistic target. Now we are there, and then some. November is trading $9.28 as this is being written. The corn represents a bigger problem.
Some of you sold some ahead of the report. Most of you now hope that some miracle happens to get us back to the old highs. The dream of selling $4 corn is fading, even while the pile in the bin needs to make the transition to the check book.
Another bright note in the report was that winter wheat acres were much lower than expected. The last USDA number was for plantings of just under 37 million, but the March 31 estimate was for only 36.2 million acres.
Wheat futures have not taken off, but they have bounced a little. Before the report, July put in a low of $4.62-3⁄4, but we are currently trading at $4.79.
The recent high was $4.86-1⁄2, back on March 14.
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