Brought to you by AG Concepts

Tuesday, April 04, 2017

Swing a ding ding to soybeans.

By Angus Brown  |  Source: USDA

Key points

  • The important USDA stocks and acreage reports were released on Friday night.
  • Stocks were confirmed at much stronger levels than last year, while acreage was positive for wheat prices, and negative for oilseeds.
  • Smaller wheat acreage put supply at higher risk with any crop issues, bolstering upside potential.

Grain1

Grain2

Two of the United States Department of Agriculture’s (USDA) more important reports for grain markets were released on Friday night. The USDA’s estimates of grain stocks, and new crop plantings, give a good snapshot of how the US supply of wheat, corn and soybeans are tracking at the moment, and how they might end up later in the year.

First to stocks.  As expected, US stocks of wheat, corn and soybeans all finished March at levels higher than in March 2016.  The good news is, however, that stocks have fallen at a reasonably normal rate from the end of December figures.

Figure 1 shows that March US stocks estimates for corn came in 10% higher than last year, wheat was a very large 21% higher, and soybeans 13% higher. 

The numbers themselves are very large compared to what we produce here in Australia.  In the US, 9 months after harvest, there is still 45mmt of wheat in store in the US.  Our record crop this year is expected to come in at about 35.5mmt.  Corn stocks are at 218mmt, which is around 8.5 years of wheat supply for us. 

It is little wonder US production tends to drive world prices, and that world prices are lower than this time last year, as the US is holding a lot more grain.

While stocks are largely known prior to the report, prospective plantings is where the trade can get it wrong the report can move the market.  The main shifts in acreage has been strong falls in corn and wheat, with many acres shifting to soybeans.

Figure 2 shows a 4.3% fall in corn plantings, back to the levels of 2015.  Wheat is well and truly out of favour, with plantings declining for the third straight year.  This year US total wheat plantings are down 8%, and according to historical planting data, are at their lowest levels since planting records were first taken in 1920. 

There is more data on harvested acreage, and it’s likely that US wheat plantings were last lower back in 1897.

Soybean acreage has reached a new record, as better returns attract growers.  There is expected to be 89.5 million acres of soybeans planted, up 7.3% on last year, and just below corn.

What does this mean?

The USDA reports released Friday night confirmed that there are no reasons to worry about current stocks of grain.  However, for wheat in particular the weaker plantings are positive for the market, as it increased exposure of supplies to weather issues over the coming months.  It is a similar story for corn, but to a lesser extent.

The swing towards oilseeds is not confined to Australia, and this is bearish for oilseed prices.  As the crop develops, prices are likely to ease.  Of course if there is a good dry spring and summer in the US the market could move higher, but the strong plantings will place considerable pressure if weather goes to plan.

Mecardo information is provided to assist in your marketing decisions. It contains a range of data and views on the current market. It is not intended to constitute advice for a specific purpose. Before taking any action in relation to information contained within this report, you should seek advice from a qualified professional. The information is obtained from a variety of sources and neither Mecardo nor Ag Concepts Advisory will be held liable for any loss or damage whatsoever that may arise from the use of information or for any error or mis-statement contained in this report. 

x

Sign up for a FREE BASIC SUBSCRIPTION now to read this article.

Mecardo will send you its latest market analysis outlook delivered to your Inbox as it's published.  You will also receive one month Premium access for free.

You tell us what information you want to hear about, so you'll only be alerted to information that is relevant to you.

Learn more about Mecardo Sign Up Now!