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The
USDA acreage report
had some surprises that shook up the market, according to Randy Koenen of the Red River Farm Network and Randy Martinson of Martinson Ag Risk Management, during the
Agweek Market Wrap
on Friday, June 30.
Chief news of that report was the boost in corn acres across the nation and an almost equal decrease in soybean acres.
“This one took the market in the complete opposite direction than everybody was expecting, maybe not a complete opposite direction, but to the degree that they took it a lot more than anticipated by the trade,” Martinson said.
The report showed 6% more corn acres and 5% less soybean acres. Last year was also a growth of corn and retraction from soybeans.
The report brought a huge adjustment in the market. Soybeans hit 80 cents higher right after the report came out.
“It was huge,” Martinson said. “Nobody was expecting that kind of number.”
This report means tighter supplies in the soybean market and looser numbers for the corn.
Koenen mentioned that corn yield estimates are as low as 170 bushels an acre. Martinson mentioned that a key player in the
Corn Belt
, Illinois, is sitting at just 26% good/excellent rating on their corn. Couple that with now about 70% of the Corn Belt in some stage of drought — that’s going to be a hit on the expected corn harvest.
Rains have passed over the Midwest, but Iowa and Illinois seem to have missed out.
Koenen and Martinson both pointed out that another part of the conversation is that soybean crush plants are still fighting for soybeans to make oil. Martinson pointed out that it’s more than industrial use; there’s a significant demand for consumption in the vegetable oil market. The USDA report showed reductions in most of the grain oil markets.
Koenen asked Martinson if the lower soybean acres were related to a lack of double cropping in the eastern Corn Belt. Martinson said it makes sense. He said it’s not happening in the southern Plains because a lot of producers planted to feed their cattle rather than getting more soybeans in the ground.
Koenen said that a talk from Federal Reserve Chairman Jerome Powell while on visit to Spain was not taken well, as he mentioned likely interest rate adjustments yet to come this year. The talk appeared to push the
cattle
market higher. Martinson mentioned contract market highs across the board.
Meanwhile, the
hog
market was a bit bearish showing a surprising increase in the hog herd.
“As bad as that market has been beat up, I would have thought it would go in the opposite direction,” Martinson said. Instead of declining 1%, there was a 1% increase. That news could have hurt the cattle market due to added supplies, but it appears it didn’t blink.
If the rain does not come again next week, there could be some fireworks in the market as the corn is soon to hit a critical tasseling stage. Martinson said if the northern Plains is not going to see the continued moisture it would drive grain prices back up.
Spring wheat tours are coming soon to the northern Plains. Koenen shared that he’s observed wheat going backwards. Martinson agreed that the rains did not come soon enough to help with the high heat that the region experienced.
Martinson said the market will continue to follow the weather as large areas of the Corn Belt wait for continued moisture to fall on their fields.
(The Agweek Market Wrap is sponsored by Gateway Building Systems.)
Michael Johnson is the news editor for Agweek. He lives in rural Deer Creek, Minn., where he is starting to homestead with his two children and wife.
You can reach Michael at mjohnson@agweek.com or 218-640-2312.
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