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USDA reports and Russia news continue to impact markets

The markets continue to move based on headlines out of Russia, as well as based on the Prospective Plantings and Quarterly Stocks reports that were released last week.

young corn.jpg
Corn planting is expected to be down across the U.S., which could leave U.S. stocks lower than normal.
Jenny Schlecht / Agweek file photo

Editor's note: Catch Randy Martinson and AgweekTV's Michelle Rook every Friday after markets close on the Agweek Market Wrap at agweek.com.

The last week of March was a rough week for the grains as traders continued to trade headlines. The only grains that did not post heavy losses were December corn and November canola. The worst performers were Chicago wheat and soybeans, which both posted losses over $1 for the week

Early week losses were attributed to reports that Russia was considering pulling out of the northern regions of Ukraine to concentrate their military offensive on eastern Ukraine and the region of Donbas. This news caused many traders to take profits and head to the sidelines as the funds removed war premium.

The market also saw position squaring ahead of end of month, end of quarter and ahead of USDA’s Prospective Planting estimate and Quarterly Grain Stocks estimate.

Losses were kept in check from export demand as China, Mexico and an unknown destination were in and bought U.S. corn and soybeans. On March 28, China was in and bought 132,000 metric tons of old crop soybeans while an unknown destination bought 128,000 metric tons of corn split evenly between old and new crop. On March 30, Mexico was in and bought 128,000 metric tons of new crop soybeans. On April 1, an unknown destination bought 136,000 metric tons of U.S. corn. The corn sales are likely prior Ukraine sales that are being sourced out of other locations.

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But the big news for the week came from USDA’s Prospective Planting Estimate and Quarterly Grain Stocks estimate that were released on March 31.

The Quarterly Grain stocks estimate came in close to expectations. Wheat stocks were at 1.025 billion bushels, 20 million bushels lower than expected and 286 million bushels below last year. Corn stocks were at 7.85 billion bushels, 27 million bushels below expectations but 154 million bushels above a year ago levels. Soybean stocks were at 1.93 billion bushels, 29 million bushels above expectations and 369 million bushels above last year. What was interesting in the stocks estimate was that a majority of the wheat and soybeans are being held off farm while a majority of the corn is on farm. In other words, commercial firms are holding the wheat and soybeans while farmers are holding the corn.

The big surprise came in the acreage estimate. Spring wheat acreage and corn acreage were much lower than expected and those two markets will need to try to acquire more acres this spring. That is not going to be an easy task as the only crops that those two could steal acres away from are durum and soybeans. Most of the other crops that are showing acreage increases are contract crops, which are harder to exit.

But the surprises were not limited to just spring wheat and corn. Traders were also surprised to see the big increase in sunflower acreage but no increase in canola acres.

All wheat acres came in close to expectations at 47.35 million. This was 420,000 less than expected by the trade but still 648,000 above last year. Winter wheat acres were estimated at 34.24 million, 146,000 less than expected but 588,000 above last year. Compared to the January winter wheat seedings estimate, winter wheat acres were off 161,000 acres.

Other spring wheat acreage was estimated at 11.2 million, 600,000 below expectations and 220,000 below last year. North Dakota is looking at cutting acreage 5.5%, Montana increasing acreage 5%, Minnesota increasing 4%, and South Dakota increasing 1%.

Another surprise was durum acreage. USDA is estimating durum acres at 1.9 million, 188,000 above expectations and 280,000 above last year. There did not seem to be enough of a price incentive above spring wheat to see an increase in durum acreage, but there must be as North Dakota is increasing acreage 11% and Montana is up 25%.

This is the second time in history that the Prospective Plating estimate has put corn acreage below soybeans. Corn acres came in at 89.49 million, 2.5 million below expectations and 3.87 million below last year. A look at major states has: Iowa: -2%, Illinois: -3%, Nebraska: -2%, Minnesota: -7%, South Dakota: +1%, and North Dakota: -12%.

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Soybean’s estimate came in at 90.96 million, 2.23 million above expectations and 3.76 million above last year. A look at the major states has: Illinois: +4%, Iowa: +3%, Minnesota: +5%, North Dakota: -3%, Missouri: +7%, and South Dakota: +5%. It appears that the decrease in corn acres almost matches up with the increase in soybeans (less corn on corn).

Except for North Dakota. North Dakota is seeing a decrease in all three of the major crops (spring wheat, corn, and soybeans) with most of those acres going to the minor crops.

For the U.S., the minor crops acreage changes include these: Barley acres are expected to increase 11%, oats unchanged, sorghum down 15%, canola unchanged, sunflowers up 10% (oil up 8%, confections up 29%), flax up 11%, cotton up 9%, dry edible beans down 6%, chickpeas down 18% and lentils up 11%.

Taking the acreage estimate that was released on March 31 and putting it into the supply and demand table from the Ag Outlook Forum from February, ending stocks for both wheat and corn are projected to get down into concerning levels. Wheat stocks are roughly estimated at 704 million bushels versus 653 million bushels for 2021, corn stocks come in at 1.1 billion bushels versus 1.4 billion bushels last year. Soybean stocks become more comfortable at 415 million bushels versus 285 million bushels in 2021. Of course, this is a snapshot of now, and these numbers are likely going to change.

In other market news, the Biden administration is opening up the crude oil reserves and will dump 1 million barrels of crude on the market for the next six months, bringing a maximum 180 million barrels of reserve oil out on the market. The government is going to make a nice profit on this adventure as well, as the average price of the oil being released is $28 a barrel. To top that, the administration is also entertaining the idea of allowing E15 for at least the summer months. The administration is also looking at loosening up the restrictions on drilling. All of these are steps in the right direction and should help to pressure crude oil lower.

What was expected to be an early spring, or at worst average spring, is now starting to look like it’s going to be a late spring. With the recent heavy snow in eastern North Dakota and western Minnesota and continued rain events in the Corn Belt, it appears that the start of 2022 planting season has been pushed back. Forecasts for rains showers are now starting to enter the forecast for the third week of April followed by below average temps for the fourth week of April. This will further delay planting.

Wheat got a shot in the arm at the start of April due to much lower than expected crop ratings from USDA’s first Crop Progress report for the 2022 season. Winter wheat gapped higher the night of April 4 with support coming from that afternoon’s Crop Progress report. The report estimated winter wheat crop condition at 30% good/excellent versus 53% last year at this time. This is the lowest crop condition rating for winter wheat in 26 years. When you break out the hard red winter wheat crop and look at its crop condition rating, it is the lowest on record for this time of year. When looking at the states: Colorado improved 8% to 19% good/excellent, Kansas was unchanged at 32% good/excellent, Oklahoma improved 4% to 22% good/excellent, and Texas was unchanged at 7% good. The winter wheat crop is 4% headed versus 3% average.

Hard red spring wheat planting has started, with 3% of the crop estimated to be in the ground as of April 3, versus 2% average. Barley planting progress is estimated at 5% complete versus 3% average.

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Cattle continued to struggle the last week of March into the first week of April. Disappointing cash activity combined with economic concerns continued to put the most pressure on the cattle market. The Federal Reserve talk of increasing interest rates a half a point in their next meeting and the increasing cost for energies continues to eat up the disposable income of the consumer. Losses were somewhat limited due to support from the mostly lower grain complex, but the strength in corn did limit the support from the weakness in the other grains. Supplies remain tight and are expected to get even tighter into the second quarter of the year. Exports also remain strong but are slowing down due to economic slowdown in other countries.

“The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results.”

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