The release of the USDA’s quarterly stocks and planting expectations report before the Easter break has had a major impact on the market, pushing prices significantly lower for wheat, corn and soybeans. To sum up the report simply, the outstanding stocks available are higher for all three commodities than had been thought, easing concerns over tight supplies, while the expected acres to be sown are also greater than what the market was expecting. In other words, there is a comfortable level of stocks still available for consumption to hold over until what should be a bumper crop this year. Of course this is by no means a certainty, and a bumper crop was expected last year before the worst drought in a generation hit the states, but at this stage there is a definite bearish tilt to the market.
A brief run through the numbers, corn inventories are at 5.4 bn bushels, well above trade expectations, while plantings were also above trade expectations at 97.3 mn acres, representing the largest area since 1936. Wheat inventories of 1.23 bn bushels are higher than this time last year. This figure was expected to be lower based on the idea that feed use had increased in the US domestic market. Sowings are pegged at 56.44 mn acres, roughly around what was expected to go in. Soybean stocks were higher than expected at 999 mn bushels, however lower than this time last year given the strong demand for the commodity this year, while planting of 77.13 mn acres was significantly below what was expected, and also below the 2012 figure.
The release of the report saw corn move the trade allowed limit down of 40 USc/bu to finish last week, while wheat and soybeans had similarly large plunges in price. The market re-opened after the Easter break last night and continued the move down, with corn copping the brunt with a further 53 USc/bu loss in value. Wheat was hit with a further 23 USc/bu drop, while soybeans lost 14 USc. We may not have reached the bottom yet either, with further downward pressure coming from Hedge funds trying to quit out of positions. Hedge funds were long most commodities leading up to the report anticipating an increase in value with the view that stocks would be tighter, the opposite has happened and funds rushing to sell has contributed to the losses.
Cotton fared much better than the grains, but has lost some ground since the release of the report, largely as a result of the losses in other commodities. Acreage is up from forecasts last month, around 10.3 mn acres, however this was anticipated given the strengthening of cotton values over the last couple of months. The May contract is holding above 87 USc/lb, currently at 87.4 SUSc/lb.
Domestically, the large movements in the futures has resulted in around $20 off cash prices for most grades of wheat compared with prices at the end of last week, along with similar softening in barley, sorghum and canola. While buying demand remains they are approaching the current market tentatively as they get a feel for where the market is beginning to line up.