THE US Department of Agriculture released its Plantings Intention Report and Quarterly Grain Stocks Report on Thursday night, just ahead of the Easter break. For all three grains, the reports held surprises.
The expectation had been that corn acres would fall, and that soybean acres would rise, pushing the soybean area ahead of the corn area for the first time. The soybean area larger is than the corn area, but there was a steep cut in corn acres and the soybean area came well under expectation as well.
Year on year the expectation was for a fall in the winter wheat acreage, and a modest rise for spring wheat acres to deliver an extra 300,000 acres of wheat in the US this year. Instead winter wheat acres have come in 12,000 acres above last year (and 192,000 acres above expectation), while the spring wheat crop is a massive 1.618 million acres above last year.
None of these crop areas met expectations. Although the numbers were bearish for wheat, they were bullish for corn and soybeans, and the rally for those crops dragged wheat prices higher after the report was released.
The other data released was on grain stocks within the US as of March 1, 2018. Corn and soybean inventories are higher year on year, while wheat inventories are lower. Both corn and soybean stocks came in ahead of market expectations, while wheat stocks were close to 110,000t under expected levels.
So, stocks were mildly supportive for wheat, and bearish for corn and soybeans, while the acreage data was very bearish for wheat, but bullish for corn and soybeans.
When the data was released there was some extreme volatility. In the first two minutes after the report was released the wheat market spiked by US7 cents a bushel, and then in the next minute prices fell by close to US10c/bu.
The overall daily move in Chicago Board of Trade wheat futures was a lift of US5.5c/bu, but Minneapolis spring wheat futures fell for the session, losing US11c/bu, and closing at its lowest level for 10 months on the back of the surprisingly large spring wheat area.
It is a little difficult to pick how the market will unfold in the short term. What we do know, is that US wheat stocks are still high, even though down year on year as expected. We also know that the US does not need a bigger area planted to wheat this year. Even if we do continue to get drought conditions in Hard Red Winter wheat areas, the large total wheat area will take the edge off any drought driven decline in production.
We also know that US corn and soybean stocks are up on year ago levels, and greater than expected. At the end of the day the market will have to focus on expected year end stock levels, rather than on the acreages expected to be planted for the next crop.
The next report that will be keenly watched will be the April Supply and Demand Report, that will give the market a view on US ending stocks, and projected exports of all three grains.
In the short term the wheat market will continue to watch for rains in the dry parts of the Hard Red Winter wheat belt. If there is ongoing dryness, that may be enough to overcome the bearishness of the acreage report in the short term.