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Grain Traders Await USDA Prospective Plantings Report

Friday, March 31, 2017

Today's Spotlight Market

The following are the pre-report estimates for this morning's USDA Prospective Plantings and Quarterly Grain Stocks reports:

U.S. Stockpiles as of March 1
Corn: 8.55 billion bushels
Soybeans: 1.68 billion bushels
Wheat: 1.62 billion bushels

Planted Acres
91.03 million acres
88.13 million acres
46.06 million acres (All Wheat)

Fundamentals

In what is normally among the most anticipated government reports for Grain traders, the USDA will release their estimate for prospective grain and soybean plantings this spring at 11 am Chicago time today. This is the first survey from producers on what they are preparing to plant this season and could provide a baseline for what the eventual size of this year's harvest will be. Going into the report, traders are looking for a significant increase in Soybean planted acres, with the average estimate just north of 88 million acres. For comparison, U.S. producers planted 83.433 million acres in 2016. A good portion of the additional Soybean acreage is expected to come from Corn, where traders are expecting only about 91 million acres of Corn this season vs. just over 94 million acres last year. Strong U.S. Soybean exports and large Corn stockpiles had created a favorable price scenario that favored Soybean planting over Corn for most of the winter. However we have started to see that favorable price ratio slip, which could draw more Corn acreage or even Cotton acreage away from Soybeans, where producers have more flexibility. U.S. Wheat acreage is also expected to decline this season, with estimates averaging around 46 million acres for all Wheat varieties, down over 4 million acres from last year. In the past we have seen some large price swings in the grain markets following the Prospective Plantings report, especially where the USDA estimate was significantly different than what the trade was expecting. So we can expect grain traders to be glued to their computer monitors later this morning.

Technical Notes

Today we are going to look at the daily spread chart for new-crop November Soybeans vs. new-crop December Corn. After reaching a peak of around a $6.45 cent Soybean premium to Corn back in late December of last year, we have seen this premium erode to where we are now down to a $5.83 cent Soybean price premium, which is the lowest premium for this spread since October. The daily chart for this spread now shows the current spread level is below both the 20- and 200-day moving averages, with the 14-day RSI now moving into oversold levels with a current reading of $28.65. The next support level is seen near a $5.735 Soybean premium, with resistance found near the recent high of a $6.1675 Soybean premium.

Mike Zarembski, Senior Commodity Analyst