TOP FARMER WEEKLY PERSPECTIVE 04/06/2023 BY BRYAN DOHERTY

Acreage and Stock Reports

If you were looking for unexpected changes in the much-anticipated March 31 Quarterly Stocks and Acreage reports, you were not disappointed. Corn acres were larger than anticipated, while both stocks of corn and soybeans were smaller. Additionally, soybean acres were smaller, setting the stage for a potentially volatile spring and summer planting and growing season.

The soybean outlook may have had a makeover, as both reports contained numbers that will be debated. For now, end users are left in a quandary. Even with a large Brazilian crop, will there be enough supply, or is rationing on the horizon? Quarterly Stocks were pegged at 68 million bushels less than the pre-report estimate at 1.685 billion bushels. The March Supply and Demand report estimated carryout for the 2022-2023 marketing year at a snug 210 million bushels. If ending stocks declined by the same 68 million bushels, this suggests an even thinner carryover at 142 million bushels. This is paper-thin, implying every bushel out of South America counts. Additionally, the acreage report was less than expected by 700,000. Simple math at 50 bushels an acre suggests a decline of approximately 35 million bushels for next year’s crop.

Quarterly supplies of corn were 80 million bushels less than the pre-report estimate of 7.401 billion bushels. This tightens the old crop supply. With a recent sell-off and end user buying picking up, this now suggests that nearby downside price risk may be limited. The increase in corn acreage was above expectations by 1.2 million at 92, and above last year’s 87.7. Old crop corn supplies stay snug and firm, and basis levels will likely surface to pull it from farmers’ hands. New crop prices, assuming normal weather and now an expectation for farmers to plant more, may have limited upside price potential to 5.75 December futures.

Of course, the key word in the acreage report is “intended.”  Shifts can occur and planting weather will have as much impact as anything in determining final numbers. The current forecasts suggest the upper Midwest may be challenged for normal spring conditions, due to cold and wet weather. Prevented planting could be a variable, yet it might be just a tad early to be concerned. From a marketing perspective, the reports reminded us to stay vigilant, concentrate on strategy, and develop a balanced approach. This is done through the use of appropriate cash sales and the use of puts for flooring prices and calls to retain ownership.

If you have any questions on this Perspective, feel free to contact Bryan Doherty at Total Farm Marketing: 800-334-9779.

Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.

Author

Bryan Doherty