Corn: Yesterday the USDA released the June 30th stocks and acreage report. This report contained a few surprises for all commodity markets. First off, ending stocks for corn totaled 4.72 billion bushels as of June 1st. That is a 6% increase over ending stocks as of June 1, 2015. The report also indicated that 3.10 billion bushels of corn was used between March and May 2016. For the same time frame in 2015, corn usage was 3.30 billion bushels. Therefore, the June 30th report indicated that corn stocks are higher than last year’s levels along with corn usage being slightly lower. The areas where the reduction in corn usage occurred were not clarified in this report. However, it is worth noting that the efficiency of ethanol plants continues to improve and some analyst are beginning to predict that the reduction in use may come from ethanol use. Ethanol production has not slowed, but plants are believed to be using fewer bushels to manufacture ethanol. In fact, according to Ethanol Producer Magazine, as of June 15, 2016, “the U.S. ethanol industry has surpassed the 1 million barrel per day mark only five times, all within the past year.”
In regard to acreage, the report indicated that 94.148 million acres were planted. That is a much larger corn crop than the average trade estimate of 92.896 million acres. This is a 7% increase over 2015’s levels and is the third highest planted acreage since 1944. The estimated area to be harvested is 86.6 million acres, which is up 7% from last year and set to be the third highest area harvested for corn since 1933. For Illinois, the report indicated that corn acres were down 400,000 acres from the March 1st planting intentions report.
For the week, exports for new crop were better than traders’ expectations. Most of the exports were reported to be bound for Asian markets.
Both the stock and acreage figures, were bearish for corn. As a result, corn futures traded lower on the day of the report. September corn futures decreased by $0.29 over the course of the week.
The current condition of the U.S. corn crop is pegged at 75% rated good-to-excellent, which is higher than this time last year. Only 6% of the crop is reported to be silking.
Soybeans: The June 30th report indicated that 83.688 million acres of soybeans have been planted in 2016. That is a much larger crop than what the trade had expected. Thus, the reason for the large increase in futures prices yesterday. The total of 83.688 million acres of soybeans is a 1.425 million acres increase over the March 1st planting intentions. This was 146,000 acres below the average trade estimate.
In regard to stocks, the report indicated that soybean stocks totaled 870 million bushel as of June 1, 2016. This is a 6% increase from June 1, 2015. The report also indicated the total usage of soybeans from March to May 2016 totaled 661 million bushels, which a decline of 5% from last year’s levels during the same time frame. The ending stocks were about 40 million bushels above the average trade estimate.
For exports, soybean exports were slightly better than trade expectations with most of exports going to Asian markets. China was the main buyer of new crop soybeans.
The report indicated just a slightly higher than expected crop size and a decline in usage. So, why did the market rally so much? These reports really caught the trade off guard and forced traders to buy positions to protect themselves. For the week, November soybean futures gained $0.59.
As of June 26, 2016, the overall condition of the U.S. soybean crop is rated 73% good-to-excellent.
Wheat: Wheat acres came in above trade expectations. Total acres planted for 2016 were reported to be 50.816 million acres, which was 947,000 acres higher than the average trade estimate. That combined with the ending stock figures , which were in line with trade expectations, caused the overall tone for the wheat market to remain bearish. Weekly exports did top forecasts with South Korea, Colombia, and Indonesia being the top buyers. Wheat harvest continues to progress across the nations with 45% of the crop having already been harvested. July wheat future declined by $0.39 over the course of the week.
Cotton: Upland cotton acreage was estimated to be 245,000 acres, which is a 90,000 acre increase from last year. Last year’s total planted acres of only 155,000 acres set a record low for Tennessee. The USDA reported that they anticipate that 10.023 million acres of cotton to planted in 2016. That is a 16.8% over 2015’s levels and a 4.8% increase over the March 1st planting intentions. Currently, 54% of the U.S. cotton crop is rated good-to-excellent while only 6% of the crop is setting bolls. December cotton futures closed at 65.13. Cotton equities, or loan options, for new crop continue to range between $0.10 and $0.12 for West Tennessee.
Take Home Message: If you believe the numbers or not from the USDA report, these are the numbers that we are going to trade for the next few months. We will likely not see an acreage adjustment until at least August and that would require a major weather event. Harvested acreage could be huge for corn at 86.95 million acres. Based on the June 30th report, principal row crop acres came in at 323.4 million acres, which is up 6.1 million acres from the March 1st planting intentions. Corn, cotton, soybeans, and wheat were all up from the March 1st planting intentions. We are set to plant and harvest a very large crop in 2016. This could potentially keep pressure on all commodity prices as we advance through the growing season. Producers should continue to watch the market for any increase in prices due to changes in weather patterns. Now that the report is past us, the market will begin focus again on the weather. Grain Newsletter 7-1-2016
