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Corn, Soybean Markets to Eye Weather

In the weeks and months ahead, weather conditions will be the primary factor determining price direction.

Yet, a lot of folks can’t seem to stop thinking about the USDA Reports this week.

With bigger stocks and more acres, corn price rallies should be viewed as opportunities for producers to sell old crop and protect new-crop prices. On the other hand, soybeans may have new life. Yet, big world inventories also suggest selling both old and new crop when prices rally.

The much anticipated quarterly Stocks and Acreage reports were released on March 31, and there were some surprises. The general pre-report consensus suggested that corn acreage could be down from last year, and it was. However, corn acreage was not down as much as expected at 89.2 million acres vs. an average estimate of 88.68. This compares to last year's figure of 90.6 million. Soybean acreage was lower than anticipated at 84.64 million, compared to the average estimate of 85.87. Last year's figure was 83.7 million. Quarterly stocks for corn were higher than expected by 116 million at 7.744 billion. The March 1 figure of last year was 7.008 billion. Quarterly stocks for beans came in at 1.333 billion as compared to the pre-report estimate of 1.341 billion and last year's figure of 994 million.

In wheat, it looked like the report had a friendly tone, yet prices reacted negatively shortly after the report. All wheat acreage came in at 55.37 million, which was very close to the average estimate of 55.61. Quarterly stocks came in at 1.124 billion, slightly below the pre-report estimate of 1.143. Grain sorghum acres came in at 7.9 million, which compares to the average estimate of 7.6 and last year's figure of 7.14. Cotton acres declined 13% to 9.55 million.

Of particular interest was the double whammy of higher stocks and higher acreage. The report suggested price rally potential will be limited, and that a resumption of a longer term downtrend is likely. November soybean futures traded above $10.00 on several occasions in recent months. This, along with December corn futures unable to trade above $4.20, should have suggested fewer corn acres. The logical takeaway from the report is that farmers would rather grow corn than soybeans.

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