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257265

A Rare Move Occurring Between Corn and Bean Prices

The USDA acreage intentions report on March 31 had an impact on prices, with corn going higher the two days after the report, and soybeans the opposite direction. With corn acres at 90 million (vs. 91 million expected) and soybean acres at 89.5 million (vs. 88.1 million expected), it was a bullish report for corn and bearish for soybeans.  

Many analysts (including Progressive Ag) anticipated a higher soybean acres number than expected, so some of the impacts may have been built into the market ahead of the report. Still, we saw soybeans drop 24¢ since the numbers came out, with corn up 10¢ or more. It’s rare that prices move opposite directions between corn and soybeans, but that is what has happened since the report due to the complete opposite result on the acreage intentions.

Soybeans have now lost all the gains last year from the lows made in October 2016 at $9.3725. Prices improved to the week ending January 20 to a high of $10.80, and now they’ve slipped back down to the October lows again at $9.37 May this week. So soybeans have since last fall gone up about $1.50, and then gone right back down the same amount.  

Corn is holding up a little better, with last week’s report providing the impetus for an upside reversal on weekly charts, bouncing down to a low last week of $3.5425 before closing higher at $3.6425. That run higher continues this week. Corn is starting to look a lot different than soybeans on price charts, with a low formed the week ending August 12, 2016 at $3.12, and then running to a high of $3.8725 the week ending February 17, 2017. We challenged these levels the week of March 3, 2017 at $3.8625, and failed there and turned the trend down. But with the upside reversal last week, corn could trade a different direction from soybeans for a bit.

Quarterly stocks were a bit on the negative side for all grains, with corn stocks 65 mb larger than expected, soybeans 56 mb larger than expected, and wheat 33 mb larger than expected. These numbers helped to subdue the markets a bit - even those who had bullish news like corn from the acreage report.

Now that acreage is known, we start to turn our attention to what the weather is doing, and its impact on potential yields of grains this summer. So far, it has been warm to end March in much of the U.S., with most of the snow gone across the country (and it has been gone for some time). This has the early look of an early spring, but the weather forecast moving into April is less favorable than March weather, which was warmer and drier than normal for much of the country. April forecasts for the next two weeks look a bit wetter for some areas of the country, with cooler temperatures forecast to come into play moving from west to east.  

U.S. weather forecasts today (4/4) show a dry spot developing the next seven days in South Dakota, Minnesota, Nebraska, Iowa, and Wisconsin (so planting could begin in these states), but wet for most of the rest of the U.S. Today it’s snowing in Colorado, and raining in Kansas, Wisconsin, Michigan, New York, Pennsylvania, and Florida, with more rain forecast to fall this week scattered across the U.S. Temperatures are forecast above normal in the northern and western U.S., but below normal in the southern and eastern U.S. The eight- to 14-day forecast shows cooler weather setting into the U.S., as temperatures cool gradually through the period to settle at below normal.  

The weather will soon become the focal point of the markets, as the weather will determine whether we plant early (generally means higher yields), and especially the rainfall and temperatures during July (which seem to have the most impact on corn yields) and August (the most impact on soybean yields).  

Wheat is kind of the sleeper in all of last week’s news, with acreage right on with traders’ expectations at 46.1 million acres. Spring wheat acreage came in right at expectations of 11.3 million acres (down 300,000 acres from last year). Durum was at 2.0 million (100,000 acres less than expected), and down from 2.4 million acres last year.  

Ray Grabanski is President of Progressive Ag Marketing, Inc., the top ranked marketing firm in the country the past eight years. See http://www.progressiveag.com for rankings.

This material has been prepared by a sales or trading employee or agent of Progressive Ag Marketing, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Progressive Ag Marketing's Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. 

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