After the March 31 Planting Intentions report and Grain Stocks Report are published today the markets could be making significant price moves. Grain producers don’t want to see grain prices drift even more to the downside, away from highs seen in January and February. Following the March 9 monthly USDA Supply and Demand Report, corn and soybeans moved out of their sideways pattern as they reached levels not seen for several months. From March 9 to March 24, corn prices dropped 11 cents, soybeans fell 35 cents, while wheat was down 19 cents.
Following the March 9 Supply and Demand Report, the market seemed to be in a void of news headlines that changed, bringing fresh news to the forefront. In the weeks following that report markets seemed to focus almost exclusively on grain supply and production. Demand mattered very little. Weekly grain export loadings and export sales with numbers above the high end of trade expectations provided zero price bounces higher as the numbers were quickly dismissed. Daily, record soybean yields and production in Brazil were on the minds of traders. It is no wonder that last month that USDA raised Brazil’s soybean production to 108 million tons, up 4 million tons from February. Additional increases will likely take place in coming months. It was also no surprise that Brazil’s corn production was increased 5 million tons to 91.5 million tons. It will be important to watch U.S. corn and soybean exports in coming months to see if USDA reduces them due to increasing exports from Brazil.
Brazil continues to capture attention when it comes to talk of world grain production. For weeks, reports of fantastic soybean yields continue to be reported. Gone were the long lines of boats which in past years reached wait times of 60 days to queue up for loading. Also, gone was the shifting of boats to be loaded from the U.S. Gulf when Brazil was unable to meet their loading commitments in a timely fashion. That missing shift also meant soybean prices were not rallying due to Brazil’s ability to load boats on a consistent basis. Br-163 in Brazil has often been called the “soybean highway,” as it moves soybeans from the largest producing state, Mato Grosso. This heavily traveled road can often become clogged with thousands of soybean trucks headed north. The trip from farm to port and back will not permit several loads a day. Pack more than just your lunch. Bring your sleeping bag, and be ready to drive for many, many hours — a staggering length of 1,211 miles stretching from Rondonopolis in southern Mato Grosso to shipping ports in Santarem to the north on the Amazon River. That distance is comparable to driving from central Ohio to Denver. When Br-163 in Brazil experienced days of delays due to muddy conditions and thousands of trucks waiting their turn to get through the muddy mess, there was zero response by the markets. Why? Ports in southern Brazil loaded soybeans without a hiccup to the overall Brazil shipping schedule.
The market will heavily focus on the March 31 Planting Intentions Report into April and beyond. U.S. corn acres will be down from last year as producers plant near 90 million acres. With U.S. corn yields above trend line levels the past three years, stocks are at record levels. Bottom line, for corn to rally, the U.S. corn yield needs some kind of weather event for the yield to fall below 165 bushels per acre. Such a yield would put corn ending stocks below 1.7 billion bushels. Last year, the U.S. corn yield was 174.6 bushels per acre. Currently 2016-17 US corn ending stocks are 2.32 billion bushels.
The question looming large for soybean prices is this: how many acres are planted in the U.S. this spring? It will be record large and near 88.5 million acres or more. If acres exceed that number and summer weather lacks hot and dry conditions, soybean prices could fall below $8 by fall. In addition, U.S. soybean exports could decline an additional 25 million bushels or more in coming months due to increasing exports from Brazil.