Old Crop Stocks Are Still Tight, So Why is the Market Spooked by Recent New Crop Estimates?

Between USDA’s January report showing a reduction of 1.6 million acres of harvested acres of corn in the U.S. for the 2022 crop, and Argentina experiencing the worst drought in 60 years, it’s not like the crop production picture has been perfect. That didn’t seem to matter to traders this week, as USDA’s Ag Outlook Forum pointed to a 3% increase in total planted acres of corn, soybean and wheat in the U.S., a signal that stocks will grow in 2023. 

USDA’s initial estimate, which is before the March grower survey, shows an uptick in corn acres to 91 million planted acres, an expectation for soybean acres to hold steady and a 3.8 million acre increase in wheat acres. 

Read More: Top 10 Charts from the Kickoff of USDA's Ag Outlook Forum

The first look at 2023 production in the U.S. seemed to pressure the markets late in the week, even after some fairly bullish news out of Argentina to start. The area experienced some frost over the weekend, but as analysts examined the temperature and areas impacted, it was determined the damage was more cosmetic and didn’t do as much to impact yields. 

“Remember that supply driven markets are always peaking when it seems like the supply is the lowest, and we may have seen that on Tuesday,” says Dan Basse of AgResource Company. 

Matt Bennett of AgMarket.net is in the camp that the trade is starting to shift its focus to new crop supplies, and realizing with Brazil’s big crop, along with the outlook of U.S. acres, that stocks may be getting bigger, not smaller. 

“Maybe people are starting to look at balance sheets for new crop,” Bennett says. “Whenever you're talking about this current crop, if you do plant 91 or 92 million acres, and if mother nature actually cooperates, you're looking at a completely different balance sheet moving forward. And I think maybe that's going to start to be more of a discussion than maybe your South American weather situation.”

AgResource agrees U.S. farmers will plant more corn this year, but Basse thinks the soybean estimate has room to grow. 

“This is the first year that USDA is offering a $10 an acre payment, if you will, for double crop soybeans,” he says. “As far north as southern Wisconsin and southern Minnesota, and then you've got all these SRW wheat acreage that could be switched over to soybeans. So, I think the soybean number can go up. I think corn is about right. But now, it's all in the hands of Mother Nature. What is she going to give us for spring planning? That's probably a pretty good place to start. But it'll be tweaked as we go forward in months, just due to Mother Nature.”

Read more insight from USDA's Ag Outlook Forum this week.