Wheat prices soar as US sowings hit record low. Soy up too

03.07.2017

Soybean futures gained, and spring wheat futures took gains this month nearly to 40% after much-anticipated US crop data showed that farmers sowed fewer acres of both crops this spring than investors had thought.

Chicago-traded soybean futures for August soared 2.8% at one point to $9.46 ѕ a bushel, touching their 50-day moving average, which they have not closed above in nearly four months.

Spring wheat futures, as traded in Minneapolis, touched $7.92 ѕ a bushel for September delivery, a gain of 7.2% on the day, and extending gains for June to 38%.

Chicago winter wheat for September jumped 6.0% to a one-year high of $5.26 a bushel.

The rally followed the release by the US Department of Agriculture, in one of its most important reports of the year, of data showing that US growers did not after all switch land from corn to soybeans this spring, despite rains which hampered fieldwork.

Soybeans vs corn

With soybeans having a slightly later seeding window than corn, investors had, after the rain delays, expected the report to show that farmers seeded 89.75m acres with soybeans this spring.

US grain stocks June 1, change on year and (diff. from market forecast)

Corn: 5.225bn bushels, +503m bushels, (+102m bushels)

Soybeans: 963m bushels, +93m bushels, (-20m bushels)

Wheat: 1.184bn bushels, +203m bushels, (+47m bushels)

Sources: USDA, Agrimoney.com, Reuters

That would represent a rise of 270,000 acres from the figure shown by a USDA report in March.

However, soybean sowings in fact totalled a more modest 89.5m acres, the USDA said, in line with the March estimate, although still well ahead of the previous record of 83.4m acres set last year.

As extra help to soybean price prospects, a separate briefing on crop stocks showed US inventories of the oilseed at 963m bushels, up more than 90m bushels year on year, but 20m bushels behind market expectations.

'Lowest on record'

Growers in fact sowed more corn than had been expected, with area coming in at 90.9m aces – some 1.0m acres above trade expectations.

US grain sowings, change from March estimate, and (difference from market forecast)

Corn: 90.886m acres, +890,000 acres, (+983,000 acres)

Soybeans: 89.513m acres, +31,000 acres, (-237,000 acres)

Wheat: 46.657 acres, -402m acres, (-413,000 acres)

Comprising: Winter wheat: 32.839 acres, +92,000 acres, (+9,000 acres)

Durum: 1.919m acres, -85,000 acres, (-83,000 acres)

Other spring wheat: 10.889m acres, -409,000 acres, (-307,000 acres)

Sources: USDA, Agrimoney.com, Reuters

Indeed, investors had forecast the data showing a small drop in sowings from the 90.0m-acre figure reported in March.

Meanwhile, data on wheat showed sowings of the grain as a while at 45.66m acres, some 400,000 acres below trade expectations, and a record low.

"This represented the lowest all-wheat planted area on record since records began in 1919," the USDA said.

And sowings of spring wheat were particularly depressed, at 10.9m acres – 400,000 acres below trade forecasts.

Harvested area was forecast at 10.5m acres, down 7% year on year.

'Feeds the bulls'

Benson Quinn Commodities termed the soybean data a "surprise", given smaller acres and inventory figures, while terming the wheat numbers "supportive" to prices, thanks to the lower-than-expected spring crop area figure.

At Global Commodity Analytics, Mike Zuzolo said that the wheat complex "should provide further support to this market, especially the corn market, given that the [wheat] acreage dropped even more than" had been expected

The wheat sowings figure of 45.66m acres "was below the lowest trade guess.

"This number 'feeds the bulls' for wheat today," a reference to a commodity trading adage that bull markets need frequent "feeding" with bullish news to maintain upward momentum.

'Bearish for corn'

However, for corn, Terry Reilly at Futures International said that the data were "bearish old crop and new crop", given the higher-than-expected sowings figure, and stocks data which, at 5.23bn bushels, came in 110m bushels ahead of market expectations.

The data were "bearish for 2017 corn supply".

Nonetheless, corn futures for September stood 1.4% higher at $3.74 Ѕ a bushel some 50 minutes after the data were released, in gains attributed to the pull from higher wheat values.

High prices of wheat, in prompting some grain users such as livestock feeders to switch to alternative crops, are viewed as typically supportive for corn prices.


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