Market plunges after Ag Outlook report

Wheat prices drop as southern Plains see needed rains and Russia looks to cash in on export sales.

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The USDA expects wheat acres to be much higher than first expected this season.
Agweek file photo

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The grains stumbled the fourth week of February with wheat posting heavy losses while corn and soybeans posted gains at the start of the short week, but then sold off to post heavy losses by the time the week ended.

Improving weather conditions in the U.S. southern Plains put wheat on the defense early in the week. Rains were reported over the President Day weekend in much of the southern Plains, which should help improve the winter wheat crop. Texas was the only state reporting a progress report and its wheat crop improved 3% to 14% good/excellent. Expectations that Russia will approve the extension of the Black Sea Initiative added pressure as the agreement will not only allow for Ukraine to ship grain, it will also allow Russia to ship more grain out the Black Sea ports.

Corn and soybeans saw early support from continued adverse weather conditions in South America. Rain continues to slow soybean harvest progress in Brazil, which in turn is slowing down corn planting. It is estimated that over 50% of Brazil’s second crop corn will be planted after the ideal planting window bringing it susceptible to drought conditions and frost. Dr Michael Cordonnier lowered his Argentina production estimate again this week, this time cutting soybean production 2 million metric tons to 34 million metric tons versus USDA’s 41 million metric tons estimate.

Buenos Aires Grains Exchange has trimmed their Argentina production estimates to surprising levels. The group cut their soybean production estimate 4.5 million metric tons to 33.5 million metric tons. The crop started the season expecting to be close to 48 million metric tons. The group also trimmed corn production estimates 3.5 million metric tons to 41 million metric tons. The crop just keeps getting smaller.


The Ag Outlook Forum released their 2023 Supply and Demand estimates for the major crops on Thursday, Feb. 23, and then released their 10-year baseline projections on Friday, Feb. 24. The numbers for wheat were negative as both planted acreage and stocks were increased more than expected. The same situation played out for corn — higher than expected acreage and higher ending stocks. Soybean’s numbers were a bit friendlier as acreage was steady with last year but stocks did come in above expectations.

A couple of items to note from the report: Corn and soybeans are expected to see record yields this year, according to the report and wheat harvested acreage is only expected to be 77% of planted versus 82% average. This is due to the drought.

A deeper look at the wheat numbers put wheat acreage much higher than expected. But the report did not expect to see a big increase in hard red spring wheat acreage or durum due to more profitable crops being planted in the northern Plains. On the supply side, USDA put planted acreage at 49.5 million versus expectations of 48.5 million and versus 45.7 million last year. Harvested acreage was estimated at 38.4 million, which was much lower than expected as USDA used a harvest rate of 77.5% instead of its customary 82.1% due to drought. Yield was estimated at 49.2 bushels/acre versus expectations of 48.6 bushels/acre. This put production at 1.887 billion bushels versus 1.65 billion bushels last year. Stocks were estimated at 608 million bushels vs expectations of 650 million bushels.

For corn, planted acreage came in at 91.0 million (1 million less than projected in October) versus expectations of 90.9 million and versus 88.6 million last year. Harvested acreage is estimated at 83.1 million. Yield is projected at 181.5 bushels/acre versus expectations of 179.7 bushels/acre. This puts production at 15.085 billion bushels, the second highest on record if realized.

Feed demand is estimated at 5.6 billion bushels, ethanol demand at 5.25 billion bushels, and exports at 2.2 billion bushels. This puts stocks at 1.887 billion bushels versus expectations of 1.809 billion bushels. The national average price is estimated at $5.60 versus $6.70 last year.

Soybeans saw light support from USDA’s Ag Outlook Forum estimate of 2023/24 planted soybean acres at 87.5 million, no change from last year but lower than the average trade estimate of 88.6 million acres. This seems hard to believe with all of the crush plant expansions and new plant construction taking place.

The Forum estimates 2023/24 soybean ending stocks at 290 million bushels, higher than last year’s 225 million bushels but lower than the average trade estimate of 304 million bushels.

Other estimates for the 2023/24 crop year were: a new record for crush at 2.31 billion bushels versus 2.23 billion bushels this past year, exports increasing by 35 million bushels to 2.025 billion bushels, and a national average price of $12.90.


Thursday and Friday were rough sessions for the grains. But there seems to be a changing of the guard taking place. U.S. grains are starting to lose favor in the export market as South American crops start to become available. Seasonally this scenario plays out every year but this year has a bit of a twist. The rains in Brazil continue to delay harvest activity which in turn is delaying corn planting. As of February 24, Brazil had 30% of their soybeans harvested versus 31% average. First corn crop harvest was estimated at 28% complete versus 34% average, and planting of the second corn crop was estimated at 39% complete versus 48% average. This puts over 50% of the second corn crop in Brazil being planted after the ideal planting window.

A higher U.S. dollar and heavy fund selling added to the selling pressure last week as traders positioned ahead of option expirations, first notice day, and end of month.

Canada is expecting to increase wheat acreage 4% this year to 8.2 million hectares but durum acreage is expected to decline 6% to 2.3 million hectares due to low profitability.

Wheat is easily losing acreage interest as both Minneapolis and Chicago traded to new contract lows at the end of February. Not exactly a way to entice acreage. In addition, durum’s projected price for crop insurance came in at $10.11, which is $1.24 higher than spring wheat’s projected price. That will encourage acres to switch from spring wheat to durum.

USDA released their February Crop Progress report Monday afternoon. The report continues to show a very variable winter wheat crop with the soft red winter wheat crop showing good improvements while the hard red winter wheat crop varied. The following states showed the following conditions: Colorado: 29% good/excellent up 9%, Kansas: 19% g/e down 2%, Montana: 21% good up 5%, Illinois: 82% g/e up 13%, Oklahoma: 36% g/e up 19%, and Texas: 19% g/e up 5%.

The last five days of February saw heavy selling pressure in the grains as Minneapolis May lost 56.75 cents in just six sessions, May corn is off 50.25 cents in just five days, and May soybeans have fallen 65 cents in just six sessions.

For the month of February, May Minneapolis gave up 38.75 cents while September lost 39.25 cents. May corn lost 47.25 cents in February while December gave back 21 cents. May soybeans fell 51.25 cents in February while November lost 15.75 cents. The selloff took Minneapolis and Chicago wheat to new lows while Kansas City traded to January lows. Soybeans hit a 7-week low and posted its first monthly lower close since September.

Cattle push higher

Cattle pushed higher with live cattle trading to new contract highs, while feedern cattle made a run to test contract highs. Early support came from Friday’s friendly Cattle on Feed report. The report numbers were: On Feed: 96% (1% below expectations), Placed: 96% (1% below expectations) and Marketed at 104% (as expected). Support also came from confirmation of a BSE case on Brazil, which has shut off exports out of the country for the short term. Gains were kept in check from a disappointing cash trade. Economic concerns continue to add concerns. The typical U.S. household is spending $395 per month more than last year for the same goods and services. At some point, this will come to result in a decrease in beef consumption as consumers start to switch to cheaper pork and poultry.


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