Soybean futures soared, and corn futures tanked in the immediate aftermath of the United States Department of Agriculture delivering some extremely surprising numbers to the market on Friday, revealing a significant swing in the US row-crop plantings to corn at the expense of soybeans.
The USDA’s June 30 Planted Acreage Estimates report pegged the corn area 2.23 million hectares, or 6.2 per cent higher year-on-year at 38.08 million hectares. This is the third highest since 1944 and the highest since 2013. The estimate is 2.3 per cent higher than the department’s March Prospective Plantings report and represents the largest increase in the corn area between the March and June reports since 2007.
By contrast, the June 30 report estimated the area planted to soybeans at 33.79 million hectares, 1.6 million hectares or 4.5 per cent lower than in 2022, but still the fifth largest planted area on record. The forecast is 4.6 per cent lower than the March Prospective Plantings report. The average trade guess was 35.49 million hectares, so it came in a whopping 1.7 million hectares lower: a big miss!
A sharp dip in soybean futures prices, which commenced in mid-April and continued through May, appears to have led to the area shift to corn. Farmers kept planting their swing area to corn all the way through May rather than switching to soybeans when prices started to fall. However, the area expected to be planted to corn and soybeans combined has decreased by 770,000 hectares, reflecting the impact of an extremely dry spring and early summer.
According to the USDA, farmers still had one million hectares of corn and 3.33 million hectares of soybeans to plant as of June 1, down from 1.63 million hectares and 6.4 million hectares, respectively, at the same time in 2022. Much of the unplanted soybean number would broadly reflect the intended double-crop area, which will be seeded after the winter wheat harvest has been completed.
The USDA also released its quarterly Grain Stocks report on Friday, providing estimates of on-farm and off-farm inventories as of June 1. Corn stocks hit their lowest level in nine years at 104 million metric tonne, 5.6 per cent lower than the same date last year. On-farm stocks, which make up 54 per cent of the total, were up 4.7 per cent, but off-farm stocks were 15.4 per cent lower. Soybean inventories came in 17.8 per cent lower year-on-year at 21.65 million metric tonne. While on-farm stocks were only down 2.6 per cent, off-farm stocks, which make up 54 per cent of the total, were 25.7 per cent lower than a year earlier.
Immediately prior to the report’s release, November soybean futures were trading 2 per cent higher after a flat day’s trade on Thursday, so obviously, some market participants anticipated a bullish number. However, nobody expected the magnitude of the area erosion, and the contract skyrocketed by 6.6 per cent at the peak before closing the day 6.1 per cent higher at 1,343.25 US cents per bushel (AU$740.75 per metric tonne). The tighter than expected inventories added further conviction to the buying, as US soybeans will likely require some rationing in 2023/24.
December corn futures were also trading in green territory on Friday morning ahead of the report but plunged as soon as the news hit the wires to close the day down 6.4 per cent at 494.75 US cents per bushel (AU$292.34 per metric tonne). However, this was the seventh consecutive daily fall after the July weather forecasts turned distinctly wetter for the corn belt, and then some good rains started to roll through some of the driest regions late last week. The extra seeded hectares and the significant change to the weather pattern overwhelmed the bullish stocks number.
Sadly, for some Midwest growers, a damaging derecho swept across southeastern Iowa and northeastern Missouri and then into central Illinois and southern Indiana last week. The long-duration windstorm saw gusts of over 160 kilometres per hour in parts of Illinois, downing corn plants and damaging grain storage facilities. Much of the downed corn is expected to recover if the stalks aren’t broken, but pollination and yield projections will definitely be affected.
The US sorghum area came in at 2.75 million hectares, up 194,000 hectares or 7.6 per cent compared to 2022. This is 336,000 hectares, or 13.9 per cent higher than the area projected in the March Prospective Plantings report, but is 200,000 hectares, or 6.8 per cent lower than the final planted area in 2021. Inventories are tight at 1.35 million metric tonne, down 51 per cent year-on-year after a poor harvest in 2022.
US farmers continue to increase their winter cropping program, with the total area planted to wheat rising 1.57 million hectares or 8.5 per cent year-on-year to 20.08 million hectares. This is fractionally lower than the area anticipated by the USDA in its March planting update.
The winter wheat area has increased 11.2 per cent year-on-year from 13.46 million hectares to 14.98 million hectares. Of this total, 10.4 million hectares is hard red winter wheat, 3.1 million hectares is soft red winter wheat, and the balance of 1.48 million hectares is white winter wheat. The USDA expects farmers to harvest just 69.5 per cent of the planted area, which, if it comes to bear, would be the lowest harvested ratio since 1933.
The spring wheat area of 4.61 million hectares is 2.8 per cent higher than farmers planted in 2022 and 5.4 per cent higher than grower planting intentions reported to the USDA earlier in the year. The USDA expects farmers will harvest 95 per cent of the planted area. The durum wheat area is down from 660,000 hectares last year to 600,000 hectares this year, 16.7 per cent lower than the March projection.
The barley area also continues to increase, with the USDA calling this season’s planted area 1.36 million hectares, up from 1.19 million hectares last year and 1.1 million hectares in 2021. The final area is 15 per cent higher than the March Prospective Planting number in March.
All wheat stocks came in at 15.79 million metric tonne, 16.9 per cent lower than last year, with 79 per cent held in off-farm positions. Barley inventories increased by 33.5 per cent over the last 12 months to 1.23 million metric tonne, with 69 per cent held in off-farm facilities such as mills, elevators, warehouses, terminals and processors.
Now that the June 30 reports are in, the market will very quickly turn its attention back to the improved weather outlook for the corn belt and its impact on moisture deficits and crop ratings. With the largest US drought expanse since 2012 across the Midwest, record corn yield potential is now behind us, but a pause in the declining yield trend is likely if the weather gods keep their promise over the next couple of weeks.
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