The USDA seems to get a thrill from keeping people guessing. At the start of this week, all the news pointed to a falling commodity market. Improving crop conditions in the Northern Hemisphere, declining demand from key importers as they stared into new crop availability and the expectation that the US farmer in particular, would sow enormous acres to corn and soybeans to fill the gap between supply and demand
Last night’s USDA stock and acreage report seemed to be at best, counter-intuitive. While wheat area is up 4.5%, all the talk surrounded the fact that the US farmer has virtually ignored corn. Up 1%, or just 325k acres, the intended corn acres were well down on expectations. The combined corn and bean acreage of 178.7M acres was below the trades expected 183.2M acres. To put this in some kind of perspective however, this represents an increase of 4.8m acres above the 173.9M acres the USDA predicted last year.
Amid all the noise coming from the corn pit, wheat area quietly came in well above expectations.
There will be plenty of speculation around the validity of the survey data. Did the new crop inverse scare off potential swing acres? Does the farmer ignore price signals and simply stick to their rotation? (remembering a good rotation is possibly the best risk management method you can use). Is the survey method flawed and the USDA simply wrong? Whatever the reason, the market will mull this over for some time and keep volatility firmly entrenched.
Wheat will continue to be a follower of corn, despite what is arguably a bearish report for wheat. Higher ending stocks and an increase in area should have seen wheat prices tumble. It would appear that the US will need a ‘perfect’ season for row crops to satisfy the market.
The week ahead….
With both corn and soybeans hitting limit-up moves last night, expect follow-through action to continue today. Wheat will be a passive follower. This report sets the scene for a tumultuous planting period over the next couple of months with little room to move in case of weather or planting issues.
Last week we looked at the Australian Bureau of Agricultural and Resource Economics and Sciences Crop Report, noting the strong growth in the forecast for
The seasons in the north and south couldn’t be more different in terms of rainfall and crop progression. While somewhat overshadowed by market movements, the
Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
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Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.
In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making.
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USDA lights up the bull pen
Last night’s USDA stock and acreage report seemed to be at best, counter-intuitive. While wheat area is up 4.5%, all the talk surrounded the fact that the US farmer has virtually ignored corn. Up 1%, or just 325k acres, the intended corn acres were well down on expectations. The combined corn and bean acreage of 178.7M acres was below the trades expected 183.2M acres. To put this in some kind of perspective however, this represents an increase of 4.8m acres above the 173.9M acres the USDA predicted last year.
Amid all the noise coming from the corn pit, wheat area quietly came in well above expectations.
There will be plenty of speculation around the validity of the survey data. Did the new crop inverse scare off potential swing acres? Does the farmer ignore price signals and simply stick to their rotation? (remembering a good rotation is possibly the best risk management method you can use). Is the survey method flawed and the USDA simply wrong? Whatever the reason, the market will mull this over for some time and keep volatility firmly entrenched.
Wheat will continue to be a follower of corn, despite what is arguably a bearish report for wheat. Higher ending stocks and an increase in area should have seen wheat prices tumble. It would appear that the US will need a ‘perfect’ season for row crops to satisfy the market.
The week ahead….
With both corn and soybeans hitting limit-up moves last night, expect follow-through action to continue today. Wheat will be a passive follower. This report sets the scene for a tumultuous planting period over the next couple of months with little room to move in case of weather or planting issues.
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Figure by @kannbwx Click on figure to expand
Figure by @kannbwx Click on figure to expand
Click on figure to expand
Click on graph to expand
Data sources: USDA, Reuters
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Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
Listen to the podcast
Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.
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In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making.
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We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.