Grain and Feed Mixed as Traders Look Forward to USDA Data

Most grain and feed markets rebounded on Friday, but the continued plunge in soybean oil prices dragged soybean futures lower. Still, most of the moves were modest, and the bounce in corn and wheat futures was likely the beginning of position squaring ahead of next week’s critical Grain Stocks and Prospective Plantings reports.

Analysts’ expectations for corn acreage vary from 92 to 94.5 million acres, with an average of 93.2 million. The average represents an increase of 2.4 million acres from the 2020 area of 90.8 million and 1.2 million acres from the United States Department of Agriculture’s (USDA) prediction at its Agricultural Outlook Forum (AOF). Expectations for soybean acres average nearly 90 million acres and range from 88.1 to 91.6 million. The average is in line with USDA’s AOF prediction and an increase of 6.9 million acres from 83.1 million planted in 2020.

Market expectations of all wheat areas range from 43 to 46.4 million and average nearly 45 million. The average is in line with USDA’s AOF forecast and an increase of 622,000 acres from 44.3 million planted in 2020. Predictions of USDA’s winter wheat estimate range from 30.4 to 32.2 million with an average of 31.8 million. The average represents a 180,000-acre decrease from USDA’s estimate released in January, but an increase of 1.4 million acres from the 30.4 million acres planted in 2020.

Analysts expect the area for the three major crops to grow to 228.2 million acres from 218.3 million in 2020. The bulk of the increase is likely to come from unplanted land in 2020, as only modest decreases in planted area for cotton and rice area predicted. Analysts project increases for all of the other minor crops, suggesting total crop area excluding alfalfa and hay will rise to 255.2 million acres from 244.9 million acres in 2020.

Estimates of USDA’s assessment of U.S. corn inventories as of March 1 vary from 7.57 to 7.98 billion bushels, with an average of 7.77 billion representing a decline of 185 million bushels from 7.95 billion last year. Analysts’ predictions of USDA’s estimate of U.S. soybean stocks range from 1.44 to 1.83 billion bushels, with an average of 1.54 billion representing a decrease of 712 million bushels from 2.26 billion in 2020. Market expectations for USDA’s assessment of U.S. wheat inventories vary from 1.23 to 1.41 billion bushels and average 1.27 billion, representing a decrease of 402 million bushels from 1.67 billion last year.

Nearby soybean futures dropped nearly one percent (May contract -13 3/4 cents per bushel), but contracts for the 2022/23 marketing year posted modest gains (November 2022 contract +2 1/2 cents). Despite the decline in soybean prices and modest increases in meal prices, board crush margins dropped sharply, with the July crush falling 11 1/4 cents per bushel. The level of crush margins during the summer will be crucial for allocating soybeans between the crush market and export market at a time when most analysts expect stocks to drop to pipeline levels. If margins continue to decline, it could be an indication export volume during the summer will be stronger than many analysts anticipated. Soybean meal futures were mainly modestly higher, but the nearby contract was modestly lower (May contract -$0.60 per ton), and deferred contracts rose by 1/2 percent or more (December 2021 contract +$1.80). The decline in soybean meal prices during a day when soybean oil locked limit down indicates how limited demand for soybean meal is right now. If meal demand does not pick up in the coming months, it will be difficult for crush margins to rally.

Nearby corn futures gained more than one percent (May contract +6 cents per bushel), but most other contracts rose by 1/2 percent or less (December contract +1 cent). Despite the rally in the benchmark contract, it still declined slightly more than five cents for the week. However, corn prices have remained in a range between $5.50 and $5.30 per bushel for most of the last two months.

Wheat futures mainly were modestly higher, but nearby Minneapolis contracts declined by about 1/2 percent (May contract -3 1/2 cents per bushel). Most Chicago and Kansas City contracts rose 1/4 percent or less (May Chicago contract +3/4 cents, May Kansas City contract +1 1/2 cents). Improving conditions in the U.S. growing regions limited the bounce from three-month lows early in the U.S. session, but selling during the last hour of trading left the contract to settle nearly six cents below the high of the day.