Inside The Market

The Beginning And The End

If you think back to last month’s column (“By the Time You Read This …”), you’ll recall I mentioned USDA’s late-March “Prospective Plantings” report marked the unofficial start to planting season. This year, it came with fireworks worthy of the Fourth of July.

USDA announced U.S. farmers would plant 88 million acres of corn, 89 million acres of soybeans, 13.5 million acres of cotton and 12.6 million acres of spring wheat. If realized, it would represent a decrease of 2.2 million acres for corn and 1.1 million acres for soybeans, offset in part by a 0.9-million-acre increase for cotton and 1.6-million-acre boost for spring wheat.

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The numbers don’t even out. Add to the equation an unexpected 1.3-million-acre increase in winter wheat and a slight 0.3-million-acre increase in expected grain sorghum (milo) plantings, and the 3.3 million acres lost in the Big 2 (corn and soybeans) are covered by a 4.1-million-acre increase in the other four crops.

RECORD STOCKS. But, it was the corn and soybean numbers, particularly the latter, that garnered the most attention. Recall that soybeans closed 30-plus cents higher, while corn showed a more limited rally. All this despite the most bearish “Quarterly Stocks” report (stocks on hand as of March 1) on record.

As an example, my analysis immediately following the announced 8.888 billion bushels of corn and 2.107 billion bushels of soybeans was highlighted by potential ending stocks ranges of 2.659 to 2.880 billion bushels (corn) and 739 to 944 million bushels (soybeans). Also, recall that, at the time, USDA was projecting ending stocks for these two major U.S. crops at 2.127 billion bushels and 555 million bushels, respectively.

The late-March move to planting season also marks the transition from arguing over old-crop to worrying about new-crop. And, it is this, I believe, that sent grain markets roaring higher that day. But, what has happened since then is just as important and, possibly, limited the scope of that initial rally.

LATE SPRING. LESS CORN? Final acreage is usually a function of spring weather. In jest, mostly, I post a table that shows likely acreage changes (year to year) based on whether Punxsutawney Phil sees his shadow (extended winter) or doesn’t (early spring). More often than not, the furry prognosticator sees his shadow, opening the door for a reduction in corn acres because of a later start to spring. This year, the likelihood of smaller planted-corn area was strengthened by spending the winter speaking season touring with DTN Senior Ag Meteorologist Bryce Anderson listening to his forecasts for a cool, wet spring.

Now, we’re in May, and planting season should soon be coming to an end. Did U.S. farmers reduce acres for both corn AND soybeans? Did the adage of “once the corn planters start running, they don’t stop until they run out of seed” hold true? Did soybean plantings come in closer to the 91 million to 92 million acres most were talking about during the winter? The answer to these questions won’t be officially answered until next January’s “final” production numbers from USDA. But, we should have a good idea by the time this month comes to an end.

Read Darin’s marketing comments each Friday at dtnpf.com.

You may email Darin at darin.newsom@dtn.com.

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