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.
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.
Have any questions or comments?
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
Categories
Have any questions or comments?
Wheat looking for direction
The wheat market is being pulled between two opposing trains of thought. One thought is that wheat should get dragged higher by deteriorating corn production
Harvest pressure in grains
Grain pricing is fundamentally all about the balance between supply and demand, but while grain is highly storable, at some times of the year, there
Cotton outlook soft
Cotton prices hit extreme highs of AUD 490¢/kg in May before collapsing sharply back to 319¢/kg currently. What happened? And what is the outlook? The
Fallacies & furphies in Ukraine
The situation on the ground in Ukraine is fluid, and information is in short supply. In such an environment, taking everything that is reported at
Don’t have an account with us? Join free.
You can have full premium access to all of our content with a monthly or annual subscription.
Alternatively, create a free account to access our Insights blog and two free premium article a month!
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.
Research: Analysis of the Australian sheep flock
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.
SERVICES AND CAPABILITIES STATEMENT BROCHURE
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.