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Planting intentions report delivered market jolt

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Grain market week in review: Corn, soybeans and wheat continue roller-coaster of ups and downs.

Missed some market news this week? Here's the latest from Jacquie Holland, Ben Potter and our Ag Marketing IQ bloggers.

Ag Marketing IQ

The March 31st Grain Stocks and Planting Intentions report is finally upon us. Traders have been looking ahead to this report for weeks now. While we do get a USDA report at least once a month throughout the year, not all reports are created equal. This report gives us a quarterly update of grains stocks on hand, as well as our first survey-based estimate of 2021 planting intentions.

The best grain markets in a half-dozen years or more don’t guarantee profits for farmers headed to the field this spring.  A supply chain notorious for problems is just one factor increasing the cost of growing – and financing – crops in 2021. Blockage of the Suez Canal for a week is the latest challenge for a world still dealing with the coronavirus pandemic. A topsy-turvy global economy combined with whiffs of inflation could squeeze profit margins even if grain prices hold on to gains. There is light at the end of the tunnel on fertilizer prices, though pullbacks won’t be in time for 2021 crops.

This year’s decision of what to plant is unusual. For what seems like the first time in a long time, we have several profitable options to choose from. In the last couple of years corn was the default choice.  Corn prices lagged, similar to beans; however, if yield targets were not hit, we still had what felt like better support from crop insurance and government programs. With soybean prices back within the scope of profitability, there is strong incentive to get back to a proper rotation which will buy more soybean acres.

Corn and soybean futures prices had been consolidating for months, and a large potential price breakout was due. To make that price break out occur, the market just needed fresh fundamental news to spur price action. The March 31 Prospective Plantings report delivered. The USDA data was surprisingly bullish, with corn and soybean futures closing limit up on report day!

USDA reported March 1st soybean stocks at 1.564 billion bushels, higher than the average trade guess of 1.528 billion bushels (bb), but down dramatically from last year's 2.255bb tally. The most shocking part of this report is where the stocks are sitting. The on-farm stocks are down a massive 41.3% from last year at 594 mb bushels. Off-farm stocks were projected at 970 mb.  If you are in the position of having to procure soybeans this summer, it is looking like it could be nearly impossible to find enough supply unless you are positioned to import soybeans from South America.

Planting intentions

USDA’s 2021 Prospective Plantings report somewhat surprised the markets, with preliminary acreage estimates for corn and soybeans falling well below trade guesses in an era of dwindling domestic supplies. Corn futures prices, which traded 2 to 3 cents lower in the minutes leading up to the report soared 25 cents higher, triggering the contract’s daily limit.

Exports

USDA’s latest batch of grain export inspection data showed a second straight week of declines for corn, soybeans and wheat. A silver lining – corn and soybean totals were ahead of what they were the same week a year ago, allowing cumulative totals for the 2020/21 marketing year to extend already sizeable leads over 2019/20’s pace. Wheat totals remain slightly behind last year’s pace, in contrast.

Old crop corn sales fell 46% below the prior four-week average in USDA's latest export sales report, with wheat also down 22% compared to the past month. Old crop soybean sales tracked slightly higher week-over-week but still slumped 54% below the prior four-week average.

Recaps

Yesterday's reports pointed to lower-than-expected acreage intentions ahead of peak planting season and corn and soybean futures shot up $0.25/bushel and $0.70/bushel, respectively, triggering circuit breakers after hitting the daily limits. In fact, all three principal grain commodities ended up closing the month higher – not lower – than expected. Looks like 2021 is shaping up to be just as exciting as 2020!

As often happens, when corn or soybeans go limit up one day, a round of technical selling and profit-taking can take center stage the next day. That’s what happened Thursday, and as a result, grain prices pushed back into the red. Corn losses were relatively minor, but soybeans tumbled more than 2% lower today. Most wheat contracts saw prices sliced by double-digits as the holiday-shortened week draws to a close.

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