Soybeans on Upswing as Corn Slips After USDA Acreage Report

July 1, 2016 05:00 AM

Analysts were expecting soybeans and corn futures to keep heading in opposite directions, even though USDA raised acreage and ending stocks for both grains and soybeans in Thursday’s Acreage and Grain Stocks reports.

“Corn was the most bearish surprise,” observed Brian Basting of Advance Trading, Bloomington, Ill., and the commentator on a post-report MGEX press call. The soybean rally “underscores the export demand,” he explained. Even the stronger dollar and Brexit situation are not expected to exert any downward pull on the bullish market for soybeans, he said.

What was that bearish surprise? USDA placed corn acres at 94.1 million, above the average trade estimate of 92.896 million acres. USDA also said it was the third highest planted corn acreage since 1944. Soybean acres were reported at a record-high 83.7 million acres just slightly less than the trade estimate of 83.834 million acres. Wheat was reported at 50.8 million acres, which is more than the trade estimate of 49.869 million acres. The biggest increase in wheat production came in North Dakota, with 600,000 more wheat acres, Basting observed.

Analysts said they were surprised that this spring’s market rally didn’t convince farmers to plant more soybean acres and less corn.

“I’m shocked a $3 spring rally couldn’t buy more soybean acres,” commented DuWayne Bosse of Bolt Marketing in Britton, S.D.  However, noting that the gain in old-crop soybeans along with 1.4 million more acres of soybeans add up to a new-crop numbers of more than 327 million bushels, he said the soybean situation may be “more neutral than bullish.”

The market saw it differently, though, sending September soybeans up more than 39 cents to close at 11.62-2 while July corn futures fell 14 cents to $3.58-6.

“I’m not sure how much lower corn needs to go until we see what July’s weather will be,” said Bosse.

In terms of grain stocks, USDA reported 4.72 billion bushels of corn as of July 1, which was above the average trade guess of 4.528 billion bushels. Soybean stocks came in at 870 million bushels, which was also above the trade guess of 829 million bushels. Wheat stocks, however, were relatively close at 981 million bushels, which was just below the average trade guess of 982 million bushels.

But the acreage could be the big challenge given that farmers planted a million more acres of corn than the trade had projected.

The increased number of corn acres certainly can be expected to push down corn prices, unless weather woes surface, according to Mike Zuzolo, president of Global Commodity Analytics.

“A similar market price‐action as 2014 can now be expected, with the trade assuming the corn crop will grow better and have a higher yield unless weekend weather being drier shifts the supply‐side concern some at the end of today,” Zuzulo said.

Basting also that the next 10 days will be critical for the corn crop because of weather.

What should farmers do, given this new market information?

For those growers who still have soybeans to sell, they “should continue to defend the soybean price by buying input options, using risk strategies to protect prices,” according to Bosse.

When it comes to corn, though, the choices may be limited for now.

“Do nothing on corn,” Bosse said. “Hope for better days (on prices).”

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Spell Check

Jordan, MN
7/1/2016 02:53 PM

  I believe Vern is right. Unfortunately the farmer's microeconomics leads to the ag boom/bust cycle at the macroeconomic level. We had a boom from 2005-2013, I wonder what's next?

AgWeb Editor
Mexico, MO
7/5/2016 08:38 AM

  Some of the comments on this article were deleted because they were not in line with AgWeb’s code of conduct. Comments insulting any person or groups of people are not permitted on this site, and will be removed as they are discovered.

7/1/2016 06:49 AM

  last falls harvest price for corn was at best poor so,let's plant a million more acres of corn.really? where is the logic here? econ 101 and demand. sorry but i have a hard time feeling bad for crop producers when they continue to over is larger than a corn bean rotation


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