GAME CHANGER FOR SOYBEANS? USDA IGNITES FIREWORKS IN THE MARKETS WITH TOW MAJOR ACREAGE SURPRISES

USDA released a few big surprises in the June acreage report, including a spike in corn acres and a large reduction in soybean acres. The agency also forecasts grain stocks below trade expectations. The markets had a lot of news to digest on Friday between the report news and the rain and derecho damage across the Corn Belt, but analysts called Friday’s reports a “game changer” for soybeans.

According to USDA, farmers made a big cut to their intended soybean acreage. USDA Jun acreage report shows farmers planted 83.5 million acres of soybeans, a large reduction from the the 87.51-million-acre intention in March.  This year’s planted acreage for soybeans is 5% below last year.

The other big surprise came in corn. USDA says farmers planted 94.1 million acres of corn this year, which is up from the 91.9 million acres reported in the 2023 Prospective Plantings report in March. The 94.1 million acres planted is also 6% higher than what farmers planted in 2022.

Other acreage highlights include:

• Cotton Acres: 11.1 million, down from 11.3 million reported in USDA’s March planting intentions survey, a 19% reduction from 2022
• Wheat Acres: 49.6 million acres, slightly lower than the 49.9 million acres in March, a 9% increase from last year

A Major Market Game Changer

The biggest surprise was in soybeans, with analysts saying this could change the course for soybean prices.

“It’s an absolute game changer in regard to the soybean balance sheets,” says Joe Vaclavik of Standard Grain. “What it means it gives you very, very little room for error in regard to yield and production given this lower acreage number. And on the flip side, we saw a higher corn acreage number that went up to 94.1 from 92, even in March. So it was it was a big divergence in the markets sell off in corn on a higher acreage number and a sharp rally in soybeans on a drastically lower acreage number.”

Mark Gold of StoneX Group says this year proves when April weather is dry, farmers will plant more corn. 

“It’s just the corn acres going up as much as they did wasn’t that big of a surprise. It’s the beans coming down,” says Gold. “That was the bigger surprise. And now you’re left with very tight carry outs on the beans. And this is assuming the government’s right on yield at 181.5 bu. per acre on corn and 52 [bu. per acre] on beans. And I don’t believe we’re near there, even with the rains that we’ve seen.”

Tighter Stocks Theme Continues in June Report

USDA’s March Grain Stocks report showed tighter stocks, which stole headlines. That theme continued Friday, with USDA’s estimates coming in lower than what the trade expected.  

As of June 1, 2023, USDA shows the following adjustments in grain stocks:

• Corn: 4.106 billion bushels, which is lower than the 4.35 billion at this time last year.
• According to USDA, soybean stocks sit at 796 million bushels, also lower than the 968 million in June 2022.
• Wheat stocks are projected at 580 million bushels, lower than the 698 million a year ago.
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Vaclavik says he doesn’t view the grain stocks report alone as bullish or bearish, but when you step back and look at the larger picture, demand is still an issue, but the supply story is changing after Friday’s reports. 

“New crop demand for U.S. corn and U.S. soybeans is not good,” Vaclavik says. “The book of export sales is terrible. Ethanol production has not been where it needs to be. The one bright spot would be soybean crush, and we’re going to continue to set records there because of the crush expansion. But I think that as prices rise, especially in soybeans, you’ve probably got to look at the demand side and you could this you could say for the corn balance sheet to USDA is in all likelihood overstating new crop demand for both of those crops on the balance sheets given what we know today.”

The Yield Debate Heats Up

USDA’s reports definitely caused some fireworks, but says traders will digest those reports in a couple days. Then, the focus is back on weather.

“I’ll tell you this, the yield number and the acreage numbers are going to be digest not not the yield number. But the acreage numbers that we saw today, they will be digested by the trade very quickly. It’ll take maybe another day or two. And we’re going to be on again trading weather and yield prospects,” says Vaclavik. 

The other possible crop impact is the derecho that blasted across the Midwest on Thursday. While the system brought crop-saving rain, it also packed a punch of winds topping 100 mph. According to agronomist Ken Ferrie who lives in Heyworth, Illinois, he thinks the earlier planted corn will be impacted the most. 

“April-planted corn is pushing tassels and trying to pollinate, so unfortunately, it’ll get hit the hardest because it’s hard for tasseled corn to stand back up; it’ll just curve at the top,” Ferrie told AgWeb’s Rhonda Brooks. “And that down that’s corn creates pollination problems. So, from a yield problem that’ll be the tough spot, and that’ll be the tougher stuff to harvest because it just won’t stand back up.”