The Acreage report lacks shocks but highlights factors to watch for

WASHINGTON — The government’s latest estimate of US areas of wheat, corn and soybeans contained few surprises but highlighted factors to watch from buyers of flour and other ingredients.

In its annual greenfield report on June 30, the US Department of Agriculture estimated the area planted for spring wheat other than durum wheat at 11,110,000 acres, down 2.7% from 2021. The estimate was within the range of analysts’ expectations for the advance report, but above the average forecast of 10,844,000 acre. Estimates included hard red spring wheat with an area of ​​10.4 million acres.

“The fact that this acreage number held up during all the talk about part of that going into the prevention stop because of the late start we got because of the very wet conditions, was significant,” said Brian Harris, CEO and owner of Global Risk Management. . “However, we did see a very significant improvement in weather conditions for spring wheat, both in the US and Canada. This was the main contributor to the weakness in the Minneapolis market compared to KC and Chicago in this break. Minneapolis has been the downside leader since the report, and may have been A lot of that has to do with that number.”

Wheat futures on all three exchanges are down more than 30% since hitting highs on May 17.

The June 30 report estimated that 1,976,000 acres had been planted on solid land, up 3.1% from future planting forecasts on March 31 and 20% from 2021. The average trade estimate was 1,839,000 acres. Acreage planted with winter wheat, estimated at 34,006,000 acres by the USDA in the June 30 report, was down 0.7% from March 31, up 1% from 2021, and below the range of pre-report forecasts.

For buyers of flour, the Acreage report is less important to price direction than other factors, said Steve Freed, vice president of research at ADM Investor Services.

“The equation for the bottom in commodities is still a lower US dollar, higher and sustained Chinese demand, copper prices, and a more pessimistic Fed,” he said. “Some feel that US CPI data may begin to show lower inflation and by the fall, year-over-year inflation increase may drop to 1%. Some feel funds are not interested in buying grain until the shark, which is stagnant, is out of the water.”

Harris said spring wheat prices may have already touched lows.

“Keep in mind that even with some recovery in spring wheat this year, stocks of winter wheat will still be at multi-year lows, so the wheat complex as a whole is still skating on relatively thin ice,” he said. “We will need large acres of winter wheat again this fall, as well as a successful spring crop this year. So the best scenario for a buyer is to look for something between $8.50 and $8.60 on Minneapolis December wheat as a target area to buy.”

Adding pressure to wheat futures was data from Statistics Canada that showed Canada’s wheat planted acreage for 2022 is 2,5395,000 acres, up 9% from 2021 and the highest in nine years. The total included 18,212,000 acres of non-hard spring wheat, up 10.5%, 6,006,000 acres of hard wheat, up 9%, and 1177,000 acres of winter wheat, down 13%.

The USDA on June 30 also estimated the area planted for soybeans in 2022 at 88,325,000 acres, up 1% from 87,195,000 acres in 2021, but down sharply from the 91,955,000 acres projected in the USDA Future Agriculture Report on March 31 and lower. of 90,446,000 acres as an average pre-trade estimate report.

“It increases the need for perfect weather to grow,” said Mr. Harris. “If you take that new acreage number and cut the yield that the USDA is currently plugging in by half a bushel or more, you suddenly find yourself with a new crop stock of less than 100 million buses, which is pretty tight. We’ve seen it before, but not much, And it certainly maintains the risk premium in market prices. We need to monitor that closely during the summer budget, especially during the critical range for soybeans during mid-August this year.”

The USDA estimated the area under corn to harvest this year at 89,921,000 acres, down 4% from 93,357,000 acres in 2021 but above average commercial expectations and the 89,490,000 acres projected in the agriculture report. Outlook March 31 USDA.

“If we can get through the pollination process unscathed over the next three weeks as we move through July, I would expect December corn prices to fall back towards the $5.25 to $5.50 level,” said Mr. Harris. “For soybeans, expiring stocks will remain tight, which could allow the market to fall back towards $12.50 to $12.75 as a comfort zone, without any issues.”

The USDA noted that because there was uncultivated acreage when collecting data between May 28 and June 16 for the Acreage report, it would collect updated acreage data for 2022 for durum and other spring wheat, corn, soybeans, oats, barley and canola. and dry beans, sorghum, and sunflowers in Minnesota, North Dakota and South Dakota. If the changes are warranted, the updated acreage estimates will be provided in the crop production report on August 12, the USDA said.

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