A Recap of the Quarterly Grain Stocks and Prospective Plantings Report
Who doesn’t love a good surprise!? Especially when it’s the bullish kind! Today’s USDA report painted a very friendly and supportive tone for grain prices going forward into the U.S. planting and growing season for 2018. The USDA shocked the market with lower than expected acreage numbers for corn and soybeans while the Quarterly Stocks numbers came in on the bearish side of estimates. Let’s take a look at the breakdown:
Corn quarterly stocks on today’s report was considered bearish. The USDA said corn stocks as of March 1 were a record 8.89 billion bushels, up 3% from last year. The market was expecting a large number, with pre-report estimates coming in at 8.7 billion bushels. However, the market was quick to ignore those numbers as the excitement of today’s news was acres.
Today’s USDA report pegged planted acres of U.S. corn at 88 million acres, which was lower than the average estimate heading into the report of 89.3 million acres, and also below the USDA Outlook Forum’s February estimate of 90 million acres. This was a bullish surprise! It’s also going to be the lowest corn acreage since 2015. Using today’s acreage data, and plugging in the February USDA Outlook Forum’s corn yield of 174 bushels to the acre, ending stocks could potentially drop to 1.774 billion bushels. If there is even a simple weather hiccup, and if yield comes in at 169 bushels to the acre (which is still really good), ending stocks drop down to 1.367 billion bushels. What today’s report solidifieds is that every single weather forecast from now until pollination will be scrutinized and traded. Get ready for the volatility ahead!
Soybean quarterly stocks were also higher than expectations with numbers coming in at 2.107 billion bushels, which was higher than the average estimate of 2.04 billion bushels. Yet, just like corn, the market participants quickly dismissed this news. Instead the focus was on the biggest shock of the report, smaller than expected soybean acres!
Planted soybean acres were expected to come in somewhere between 91 and 92 million acres, so when the USDA announced soybean acres at 89 million acres, many traders’ jaws hit the floor! One thing to note, even though today’s soybean planted acreage number was a friendly surprise, it is important to point out this will be the first time in 35 years that U.S. farmers will plant more soybeans than corn. Using today’s acreage data, if yield comes in at 48.5 bushels per acre (which is the February USDA Outlook forum number), then ending stocks come in at 520 million bushels. However, if yield should end up being 46 bushels per acre, then ending stocks come in at a low 300 million bushels. Weather matters this year, in addition to monitoring export demand in each passing week.
Quarterly grain stocks for wheat came in at 1.494 billion bushels, which was mostly in line with pre-report estimates of 1.49 billion bushels.
All wheat planted acres were a bit of a surprise, coming in almost one million acres higher than expected. The USDA has suggested all wheat planted acres will now be 47.3 million acres, higher than pre-report estimates of 46.5 million acres. Winter wheat acres are 32.7 million acres, in line with pre-report estimates. The acreage jump higher actually came from spring wheat acres, which are now estimated to be at 12.6 billion bushels, a full million acres higher than pre-report estimates.
Going forward there’s quite a bit of news and information to watch:
- Fund money back into commodities
- Energy prices rallying
- The U.S. Dollar trending lower
- Increasing global demand for corn and soybeans
- Lower than expected planted acreage numbers for corn and soybean futures
The market looks poised to be well supported for now. Keep an eye on all this and be ready for whatever the market may throw at you.
If you have questions, you can reach Naomi at firstname.lastname@example.org.
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