Grain and cattle futures ended higher Tuesday.
Grains Supported by Money Flow
Grain futures closed mostly higher Tuesday following the USDA reports.
Arlan Suderman with StoneX some of the support in the grains came from money flow with the rally in the crude oil market and continued higher fertilizer prices which have funds buying grains on ideas of shrinking crops globally.
“Money flow has been coming into the food and energy-based commodities on expectations that as long as the Strait Hormuz is closed to movement of energy and fertilizer through it, it risks higher prices, and not just higher prices for energy, but higher prices for food and even
food shortages. In fact, there’s quite a headline going across Wall Street on day-to-day now expecting global crisis of food here in the months ahead. The United Nations adding to that.”
Corn Acres Cut
USDA’s Prospective Plantings Report showed a 3.45 million acre cut in corn acres from 2025 to 95.4 million largely due to rotation and the higher input prices to plant corn. However, that was above trade expectations.
“There’s a rotation. It’s not a straight 50-50 every year. That was part of the reason we expected corn acres to be down. Perhaps that’s part of the reason that we saw Iowa, Wisconsin acres down, Nebraska acres down as part of that annual flip-flop of rotation. But overall... think the high fertilizer prices, the lower, the high input costs, I should say, overall, even before the war started weighing into this, in addition to expectations and now confirmed expectations that we would have a strong biofuel program for this next year that would increase demand for soybean oil.”
Still Suderman says it is likely that may be the highest acreage print as higher fertilizer prices could trim even more acres through the planting season.
“The tendency would be there. But it comes down to weather, though, as well. If the weather’s good for planting, we tend to increase corn acres. If it’s not, we tend to increase soybean acres. And I think that’ll still hold true. The core of the Midwest doesn’t like to change its rotations. Changes tend to happen in the Plains and in the South.”
Corn Production and Ending Stocks Projections
Using the 95.4 million acres and a 183 trend line yield for corn put production at 15.9 billion bu. says Suderman.
“That’s down about 1.1 billion from last year. Ending stocks dropped down to around 1.7 billion bushels, that’s a little over a 10% stocks to use ratio. That’s adequate to meet demand for the coming year. But if you drop that via weather or acreage or whatever might reduce that, then you start getting tight and the market gets uncomfortable. So we’ve taken away some of our margin for error in the coming year.”
Acreage Offset by Lower Quarterly Stocks on Corn?
The higher acreage may have been offset by lower than expected quarterly stocks for corn at 9.024 billion bu. That was up 11% or 877 million bu. from last year. However, that is below the nearly 1 billion bu. increase expected by the trade due to higher usage and disappearance.
Suderman says, “And particularly with the industry commonly believing USDA is too high on their feed and residual use number. Now, remember that’s feed and residual. Residual is just a plain number depending on how accurate they are with the production of the crop. If you assume the crop size is what USDA says in January, then they need to come down on that feed and residual number. Today’s number gives us our first concrete evidence that perhaps they overstated the size of this year’s crop. And I hear farmers across the Midwest saying, I told you so. They’ve been arguing that all along. We’ll see. It could be survey error as well.”
So he says we need to see another quarterly stocks report or two to see if this trend holds.
Soybean Acreage Up to 84.7 Million
USDA raised soybean acreage 3.485 million acres from 2025 to 84.7 billion bu. However, that was under the trade estimate.
The higher acreage came as farmers, especially in the Northwestern Corn Belt, shifted acres back to soybeans. Plus, higher fertilizer prices made the idea of more corn a challenge says.
“That was the area of the Midwest where we were most vulnerable without fertilizer in position before the war started.”
Farmers Optimistic About Better Soybean Demand?
Another factor is the demand picture for soybeans is better than a year ago, with increased RVOs and China export demand.
Suderman explains, “When you look at this crop, if we assume USDA’s 53 bushel yield from their outlook form and these acreage, that gives us a crop of about 4.43 billion bushels. That’s up about 170 million bushels from last year’s crop. You look at a strong biofuel program that we have for this coming year. Then it comes down to does China buy the 25 million metric tons of soybeans? Do they buy 12 million metric tons like they did this year? If they buy the 12 million metric tons, then this is adequate. But if they buy the 25 million metric tons that they committed to back in October, this is not enough acreage.”
How Many Additional Soybean Acres are Needed?
He thinks the market needs to buy another one to two million acres.
“Again, it comes down to what your confidence level is on China buying 25 million metric tons in the coming marketing year. I’m not comfortable with that number because of the price differential with Brazil. So it would have to be bought by the state grain buyers going into the reserves, and the reserves are full. I do think that they’ll buy soybeans,” he says.
Suderman does expect a China deal on May 14 but he doesn’t expect a significant amount of soybeans but instead there could be a significant purchase of corn.
“And the market’s not expecting that. If that happens, then corn would have to fight for acres once again as well.”
Wheat Acres Record Low
All wheat acres were a record low at 43.78 million with spring wheat acres down 570,000 acres to 9.42 million and the lowest levels since 1971.
This isn’t a surprise with the low profitability of wheat in the U.S. according to Suderman.
However, he says acreage is also declining in major producing countries around the globe due to the higher fertilizer and fuel prices. “Our office in Australia is now saying that Australia acreage should be down about 6% this coming year. Australia will be the next big test of the fertilizer issue and how yields hold up as they look to the planting season ahead. And how much fertilizer do they apply? Do they cut back?
Do they have availability of fertilizer? They’d be most directly impacted by the shutting of the Strait of Hormuz as far as fertilizer flow.”
The U.S. has plenty of surplus wheat with stocks at 1.3 billion bu. and up 64 million from last year.
“Does all this will mean that the rest of the world has to now come to the U.S. to get our surplus supplies and work those levels down over the coming year or two?” he asks.
Wheat on Verge of Technical Breakout
Wheat had a strong close on Tuesday and from a technical standpoint in on the verge of a breakout.
“Today would indicate that. I hate to say that on one day’s action. We need to see follow through tomorrow, but the money flow narrative fits. And so that would be the risk at this point, I would say, if we can confirm it tomorrow.”
Plus, many of the major wheat producing states had significantly lower crop ratings on Monday.
“We all know that that can change in a hurry if rains fall. Now, if you look at the forecast for rains for the next two weeks, there are good rains forecast for areas of the Central and Southern Plains where it’s been the driest. But the Western, the Southwestern Plains, that’s really 70% of the hard red winter wheat belt. It really remains pretty dry with very limited moisture. So if we get through the next two weeks and we don’t see
much rain, that could start really coming into threatening the size of this year’s crop at that point,” he adds.
Cotton Acreage Increases
Cotton acreage was a bit of a surprise coming in at 9.64 million acres. That was up above expectations and the National Cotton Council’s 9 million acre projection.
Suderman says he wasn’t as low as those projections because it’s really tough to change cotton acres and you have the equipment.
“And I think we’re getting acreage down now where it’s tough to fall much lower than where we are because the equipment really locks you into growing cotton. The poor profitability of cotton and the fertilizer situation is going to play into that as well and how that acreage might change,” he states.
However, he says the biggest increase came in Texas and farmers in the South have been planting for a while now. “So, March surveys should be closer to farmer intentions oncotton than it is in the other crops.”
Cattle Make New Highs for the Move
Live and feeder cattle futures made new highs for the move again on Tuesday.
Suderman says the market got help from the rally in the equity markets but is also getting a push from last week’s higher cash and some technical buying.
“I think part of it is this money flow issue on food scarcity issues, wanting to own food-based commodities and protein is on top of the pyramid right now under this administration.”
