Here's Why Parched Portions of the Corn Belt Matter in the Acreage Debate
USFR-RT1 6.26.21
Corn, soybean and soybean oil futures fell Friday on news the Supreme Court released a decision to back oil refiners in a Renewable Fuels Standard (RFS) tug of war between refiners and renewable fuels groups. Up until Friday, the market’s price action was all about the weather.
“Certainly, the weather has been the big play out here,” says Mark Gold of StoneX Group. “We have rains moving in. They've been talking about two to four inches…it's a combination of really two things right now: the rain and the acreage report on Wednesday.”
The rains started falling this week. While some areas saw rain to help relieve their parched crops, others saw too much moisture, with more rain in the forecast for this weekend. While the rain is providing relief, some areas of the Corn Belt are still waiting on a drink.
“There's still large areas of the far northwest Corn Belt in the Dakotas, Minnesota, parts of northern Iowa, parts of Nebraska, that are critically dry,” says Chip Nellinger of Blue Reef Agri-Marketing. “If they don't receive needed rainfall here within the next couple of weeks, you're probably if you haven't already done irreversible yield damage and taking the top end off of that. So yes, it's good to see better rains here. Maybe the drought is over for the bulk of the Corn Belt. But there's still multiple millions of acres that are in peril here and need some rain, and it's not really in the forecast.”
Weather was a major factor, but the attention is also on USDA’s June acreage report set for Wednesday, June 30.
“Some of the expectations are for five or 6 million acres more corn,” says Gold. “ I personally don't see that. I think it's going to be somewhere around two to 3 million more acres of corn, 1 million and a half more acres of beans.”
Gold says the question then becomes if the possible increase in acreage can offset the poor yields expected in portions of the northern Corn Belt, Upper Plains and West.
“A lot of the country, particularly North Dakota like we said, but parts of Nebraska, and certainly the Northwest, is in trouble. Not that we grow a lot of corn in Oregon or Washington State, but look at the Oregon ratings. On wheat, those ratings are the worst we've ever seen. So, can we offset the potentially poor yields in some states with more acres and potentially huge acres in Illinois, Indiana, Iowa? It's possible out there, but there's still a lot of balls in the air that are still being juggled.”
FBN’s grower survey this week indicated while farmers planted more corn acres, the actual planted soybean acreage fell from the March report.
“It would be wildly bullish if that were true,” says Nellinger. “I’m probably in Mark's camp as well. I think it could easily come in 2 million acres additional or less, and maybe just a million or touch more in beans. I don't know where all the acres are going to come. So, I think the market got way ahead of itself with some private estimates showing 5 million to 6 million more acres of corn. The ‘I States’ don’t swing it. So, if you do see a big increase, it's going to be from the Dakotas. They're already burning up, so I can't get behind the fact that, from an acreage standpoint, is going to be wildly bearish.
Nellinger points out while his expectations are for a report that doesn’t show a huge increase in core crop acres, the June Acreage Report is a volatile report that typically produces surprises.