This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Sometimes we go a week without a market-moving headline, and sometimes we get a couple weeks’ worth in a day or two. Last week was the latter.
Thursday morning, USDA released its baseline projections for acreage at the beginning of the annual outlook conference. These estimates are made by economists and analysts without farmer surveys or input, so they are just the starting place. The numbers we get on the Prospective Planting report on March 31 will be based on actual farmer surveys.
On Thursday, USDA penciled in 94 million acres of corn, which is down from last year’s 98.8. They estimated soybean acres at 85.0, which is up from last year’s 81.2. Combined acres are at 179 million, which is probably close, but the split between the two will be debated all the way until next January if the year goes like the last one. The corn/soybean ratio finished Monday at 2.41, where 2.5 is about dead even between corn and beans.
USDA used 183.0 for an estimate of trend yield on corn, compared to its final estimate of last year’s yield of 186.5. For soybeans, USDA used a yield of 53.0, which is the final number for last year, too. Historically, USDA sticks with these estimates of trend yield in its balance sheets on the monthly reports until about May, so get used to seeing them.
The other big piece of news at the end of last week was the Supreme Court ruling that Trump had overstepped his authority with the structure of his tariffs. When the news was first released, the ag markets fell, and soybeans were down double digits. Before the end of the session, they had recovered their losses and closed up on the day.
It’s still way too early to tell all the implications of this, but my initial reaction is that we are not going to see a dramatic change. While this was the most visible and talked-about tool that Trump had used, it was not the only one. Trump is already making threats to any country that goes back on a deal it made with him. What tool he is going to use to enforce that is still unknown, and that might make the threat even bigger. It was also not the tariffs that caused China to back down and start doing his bidding. It was domestic issues that Chinese President Xi has to get under control, and striking the tariffs down does not change that. It makes no sense for China to buy more beans from us, and they may not, but I do not think that will be caused by this ruling.
We are still waiting on more clarity on U.S. biofuel policy, but the market is more hopeful, and bean oil rallying to levels not seen in several years reflects that optimism. That has helped support bean strength, in addition to the possibility of China buying more, even though it does not make sense for them to do so.
Wheat was a leader last week on short covering due to weather and geopolitics. Cold weather and winter kill talk in the U.S. Plains and eastern Europe contributed. Setbacks in the peace talks between Russia and Ukraine added to fund buying. All the U.S. military assets being moved to the Middle East to prepare for a possible strike on Iran further contributed.
March options expired last week, and first notice day on the March futures will be on Friday. Historically, there is a lot of selling pressure on the corn and soybeans in the sessions before first notice day as farmers raise cash for taxes and other payments. Other than that, the market will continue trying to gauge how the court ruling will affect the possible outcomes we previously had priced in. With all the unknowns, I am hard-pressed to see why the funds would want to really press the short side right now.