This is the Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
Words cannot express how glad I am to have the USDA Prospective Planting and Quarterly Stocks Report behind us. To not get kicked in the shins by it is a really nice added bonus. This is one of the biggest reports of the year and it can set the tone for the market for a while so a big negative surprise would not have been fun. The stocks report was not where the biggest surprise was. Corn stocks came out 100 million bushels less than what the trade was expecting. Soybeans and wheat came out just barely above expectations but not enough to be of consequence.
The big surprise on this report was in the intended acres. Corn acres were estimated at almost 1.7 million acres less than the average trade guess at 90.036 million. That is a million acres less than the USDA outlook conference and 4.6 million less than last year. Between this drop in acres and the lower stocks, this indicates the market is doing its job to increase demand and lower production. Soybean intended acres came out at 86.51 million which was almost dead on the trade estimate. That is just a bit more than a million acres less than USDA used at the outlook conference and 2.9 million more acres than last year. Here again the market is doing its job in trying to increase production. Beans have added a bit more of a cushion.
One thing that jumps off the page on this report is the total crop acres. USDA estimates we will plant 248.9 million acres this year which is 3.7 million acres below expectations and 4.9 million acres less than last year. The question asked is where did all the acres go? The low prices are certainly taking some marginal land out of production and we lose some land every year to different types of development. One thing i worry about when I see a surprise that big is that USDA may “find” some of those missing acres on the June Planted Acreage Report and give us a surprise the other way. We need to keep that possibility in mind when we make sales this spring.
The Funds had been adding to their short positions ahead of this report but there was a lot of short covering after the report was released. I think they are going to be nervous going into the spring planting season short with the buffer getting smaller and all the weather risk of a growing season ahead. Brazil has finished planting the second crop corn and their weather will be closely watched as they head into pollination in mid April. Market will also be watching US weather more closely as we head into spring. Market is closed today for Good Friday but will open Sunday night at 8pm as normal.