USDA PEGS U.S. SOYBEAN ACREAGE AT RECORD HIGH

The U.S. farmers will plant a record amount of soybean acres, while reducing corn and wheat acreage.

On Friday, the USDA pegged the U.S. 2017 soybean acreage at 89.5 million acres, above the trade’s expectation of 88.12 million and above last year’s acreage of 83.43. If realized, this year’s soybean plantings would be a new record.

As a result, the CME Group's soybean market closed down double-digits.

At the close, the May corn futures settled 6¢ higher at $3.63 1/2, while December futures finished 6 3/4¢ higher at $3.87 3/4.

May soybean futures closed 17¢ lower at $9.46. November soybean futures finished 8 1/4¢ lower at $9.55.

May wheat futures ended 3 1/2¢ higher at $4.24.

May soy meal futures closed $7.20 per short ton lower at $307.70. May soy oil futures closed $0.19 lower at 31.82¢ per pound. 

In the outside markets, the Brent crude oil market is $0.34 per barrel higher, the U.S. dollar is lower, and the Dow Jones Industrials are 62 points lower.

MARKET REACTION

Michael Rusch, Sales Director- Ag/Commercial for Stewart-Peterson, says that the corn market reaction to the report is surprising.

“With lower than expected acres, higher carryout, the reaction,so far, is a little disappointing only being up a few cents,” Rusch says.
 
With 90.0 million acres and trend line yields at 170 bushels per acre (assuming demands stays as predicted), Stewart-Peterson sees a 2.2 bill bu carryout.

“If trend line yield drop to 160 b.p.a., we see potential carryout drop to just under 1.5 bil bu. And the odds of 5 record crops in a row is in question. So, the point is that we don’t need to see a disaster of a crop to see carryout drop far enough below current levels to support price,” Rusch says.
 
“So far, the reaction to the bearish soybean report is mildly supportive, considering that we are not down more than 12-15 cents. It was probably built into the market over past few weeks,” Rusch says.

Jack Scoville, The PRICE Futures Group’s senior market analyst, says that the surprise is in the acres.

“There was a bigger switch between beans and corn than expected, by about 1 million acres. So, I think we will see some support for corn. The stocks were big across the board, but the bean guys are beating on it a bit too much, I think. The rice data is about right and should support the market longer term. Cotton high, at the expense of corn, wheat, rice. Overall, I think corn holds and maybe beans find a bottom today. We still have to plant, grow, and harvest after all, and the prices have gotten pretty cheap.”

Deanna Hawthorne-Lahre, StatFutures co-founder and trader, says that the report was not friendly to the soybean market.

“Bean acres caught weak longs with their pants down with the 89.5 mill acres,” Hawthorne-Lahre says. The peeps I talk to had this number in mind, but clearly the market didn't believe it.”

She adds, “Another big surprise is the spring wheat acres at 10.6 v. 10.9 last year. The trading pit was whispering under 10, so this definitely caught the big boys wrong.”

“Corn acres at 90.0 million is a bit surprising but I was figuring 91.5, so no biggie,” Hawthorne-Lahre says. Stocks build continues to weigh on the market as well - wheat stocks up 21% year-over-year is pretty amazing, given the lower acres last year.”

See the USDA’s U.S. Prospective Plantings report here. 
See the USDA’s U.S. Grain Stocks report here.