Jon Scheve with weekly market commentary made on March 29, 2024
Of the 15 reports put out by the USDA each year the March planting intentions report is arguably the 4th or 5th most anticipated report of the year.
For corn the USDA surprised the market by dropping planting intentions to 90 million acres which is 1 million acres below what the Economic Forum printed in the middle of February. In the last 17 years the number of planted acres posted in the June report was higher than the intended acres of the March report 9 times. On average the amount of increase in acres to the June report was around 1 million acres.
Where do prices go now?
In the last 10 years the price of May corn on report day has moved up or down more than 20 cents only 1 time. In 8 of the last 10 years the price of May corn the week after the report, was trading in the opposite direction from the starting point it traded on report day. With prices finishing higher on report day this year that would suggest the market will be lower in a week.
In the 2 years that May corn did not trade in the opposite direction, a week later it was still trading at values less than the directional move it traded on report day. And finally in the last 10 years May corn finished the following week within 10 cents of where it started the day before the report.
Can the Corn Market Continue to Rally?
Many in the trade were suggesting the report was bullish. While the numbers released in the report were below the expectations of several analysists, I’m not sure I would call it bullish. More likely this report was just not overly bearish.
The old crop carryout will still likely be above 2 billion bushels and that is simply too much corn to justify significantly higher prices. Below are some potential carryout outcomes if acres remain the same or increase after this report and if yield drops back:
It will take quite a drop in yield even with the reduced acres and slightly increased demand this coming year to get prices to rally significantly. To get a significant rally, carryout will need to fall under 1,600 (million) bushels.
On Beans the USDA’s planting intentions matched what the analysts thought would be reported. In the last 17 years the final planted acres on beans have been lower than the March number 10 times. In the 7 years where it was increased it averaged about 1 million additional acres.
While the bean acre number is not overly bearish the USDA did find a few more bushels in storage than the trade was estimating. That could mean that carryout is increasing, and prices will struggle to rally.
Where do prices go?
The biggest issue long term for beans is competition from South America. One consulting group there raised total production in Brazil to levels slightly above the USDA’s estimate and they could be the first of several to start changing their estimates over the next month or two. If there are indeed more beans there than what the market has been guessing this could mean that those beans will compete with of our exports. That could lead to larger carryout here in the future and it will take a drought to induce rallies. 8 out of the last 10 years the price of May beans a week after this report were lower.
Bottom line
The report did show a drop of 6 million acres potentially planted to corn, beans, wheat, and cotton. That is the lowest printed number for the March report in 14 years. Additionally, all main crops planting intention was the lowest of the last 17-years during the ethanol era. Also, the total corn and beans potential planted acres was the lowest combined value since March of 2016. The June report of 2016 had increases in both corn and beans of about 1 million acres each.
It seems a little strange that the total acres dropped that much. This leads me to believe that eventually there will be an increase in planted acres in the June report just like we have seen in other years. I would expect an increase in the corn and potentially the cotton acres along with all the other minor crops. The bean acres will probably be more dependent on what the weather is like during planting and how fast the corn gets planted.
Jon Scheve
Superior Feed Ingredients, LLC
9358 Oak Ave
Waconia, MN 55387