Grains were mostly weaker overnight with corn still feeling the sting from yesterday’s shockingly high corn acre number. In outside markets, stocks were lower on unemployment ticking up slightly to 5% from 4.9%.
Yesterday brought news that US farmers intend to plant 93.6 million acres of corn, 5.6 million more acres than in 2015. This was well above average estimates of 90 million acres and above the high end of analyst estimates at 91. The increase was most prominent in the Plains and Delta region which combined added 3.4 million acres, and the states of AR, LA & MS where flooding is a major issue were pegged to increase by 1 million acres combined.
Wheat was definitely the benefactor of higher corn acres seeing a 5 million acre drop to 49.6 million. This would be the lowest wheat acres in 45 years if realized. This has the potential to draw down carryout in 2016 especially if exports recover from their big slump in 2015. With a weakening US dollar it seems likely wheat exports will come back in 2016.
For soybeans, acreage estimates of 82.2 million were just below the average estimate of 83.1 and below last year’s plantings of 82.7. However, even with normal yields and usage numbers on par with this year it would still lead to a jump in carryout from 460 MB to over 600 MB. Also, many analysts expect farmers to be more likely to switch out of corn into soybeans as prices have rallied since the March 1 survey of farmer planting intentions.
Overall this report was not favorable for the long-term outlook on grains. Even wheat which saw the biggest bullish input faces a big uphill climb to gain more competitiveness in the world market as the global glut keeps prices on the defensive.
The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a dba of Foremost Trading LLC (NFA ID: 0307930)
