All about that soil

On Tuesday, March 31, the U.S.D.A. released its annual Stocks and Acreage report.

which usually lays down the foundation for U.S. grain consumption through the rest of the marketing year and acreage estimates to price new crop off of. In three of the last four years, corn has moved its limit thanks to the time of year – end of the month, end of the quarter, and weather forecasts all play a factor (not to mention the algorithmic/high-frequency speculators). Ultimately, the report did have some surprises but most of it was seen on the soil side of things and so, while some fireworks went off, it wasn’t like the recent shows of years past

Going into the report, there was some speculation that U.S. feed and residual use for corn and wheat may be lower given their decreased price spread over the first quarter of the calendar year and livestock inventories being higher year-over-year. However, corn inventories as of March 1 were categorized as up 11 per cent year-over-year at 7.74 Billion bushels and above the average trade pre-report estimate of 7.6 Billion bushels. Wheat stocks were pegged at 1.12 Billion bushels, up six per cent from last year but relatively in line with expectations, as were durum stocks, pegged at 37.6 million bushels. The March 1 inventory of oats was up 69 per cent from last year at 59.4 million bushels while barley stocks dropped three per cent to 118 million bushels. Finally, the amount of available soybeans was up a significant 34 per cent from 2014 at 1.33 Billion bushels.

Many analysts were expecting soybean acres to be quite high going into the report with an average guess of 85.9 million acres, but the number that the U.S.D.A. published was well below that at 84.6 million (although still a hearty climb from last year’s 83.7 million acres). As for corn, planted area isn’t seen falling as much as analysts were expecting but still below last year’s 90.6 million acres at 89.2 million. Finally, total U.S. wheat area is seen down from last year by over 1.4 million acres to 55.4 million, with the majority of the decline attributed to winter wheat acres, falling to 40.75 million from 42.4 million last year. Rounding things out, U.S. durum acres are seen growing 18 per cent from last year to 1.65 million acres, barley acreage is up 9.5 per cent to 3.26 million, oats acres are seen also up by eight per cent to 2.93 million, canola acres are down nine per cent to 1.55 million, flax acres are up 29 per cent to 401,000, and peas and lentils are up 7.5 per cent and 37 per cent to one million and 385,000 acres respectively.

Ultimately, the report showed us that U.S. farmers are still a little up in the air over what they may plant. More sorghum is going into the ground in the south while more wheat and specialty crops are clearly getting planted in the north. One technical factor to keep in mind is how short managed money is in the futures market, implying that any rally to the upside could be accelerated by funds covering their shorts. We’ve already seen this a few times in the last few weeks and more could come as weather forecasts becoming the top headlines to watch over the next month or so as we hit the soil full-tilt all across the northern hemisphere.