The much anticipated USDA acreage update heavily favored soybeans over corn and wheat. The U.S. revised planted soybean acres to 83.5 million, down 4 million from the March intentions. It is not uncommon to see elevated corn plantings in years with dry springs, but this much of a change was a shock for the market. Corn plantings were above trade expectations at 94.1 million, compared to the March intensions report of 92 million acres. Total wheat plantings were reported at 49.6 million, down 250,000 from March. The USDA added that 2.49 million corn and 8.22 million soybean acres were still unplanted when the data for this report was collected.

More interest was placed on harvested acres. Harvested corn acres were projected at 86.3 million. If we use the current USDA yield estimate of 181.5 bushels per acre (bpa) this will give us a crop of 15.66 billion bu (bbu) and ending stocks of 2.6 bbu using current demand estimates. Harvested soybean acres are projected at 82.7 million and this will lead to a crop of 4.3 bbu using a 52 bpa yield. Current demand indicates this will lead to a carryout of 140 million bu (mbu) and require additional price rationing. Harvested wheat acres came in at 37.7 million and a crop of 1.69 bbu when using the USDA yield of 44.9 bpa. This would increase ending stocks 30 million bu (mbu) to a 1.69 bbu total.

Quarterly stocks data was less surprising for trade. The U.S. corn inventory on June 1 totaled 4.1 bbu, which was in the middle of trade estimates and down 250 mbu from last June. Soybean inventory totaled 796 mbu, down from 968 mbu on June 1, 2022. Wheat stocks came in at 580 mbu, which was just under trade guesses and down 118 mbu on the year. Of these reserves, corn was split with 2.22 bbu on farm and 1.88 bbu off farm. Soybeans were 322.8 mbu on farm and 472.7 mbu off farm. Of the wheat in storage, 124.4 mbu was on farm and 455.7 mbu was off farm.

The predominate fundamental story in the market right now is weather and what impact it has had on U.S. yields. There is little doubt that the U.S. corn yield has been reduced, but by how much is hard to predict. While there are several years that are comparable to this one, the advancement in genetics and farming practices has likely buffered loss potential. At this time, most analysts feel the U.S. has lost 500 million bu of corn production due to drought conditions. While this is possible, the U.S. would still see its ending stocks increase 305 million bu from last year, even with this loss.

The updated renewable fuel blend rates have been released and met with a mixed response. Total biofuel demand is projected at 20.82 billion gallons for 2023, 21.87 billion gallons for 2024, and 22.68 billion gallons for 2025. These totals were on the low side of trade expectations and below original proposals. The most disappointment was on ethanol, where usage is expected to hold at 15 billion gallons for all three years. Industry officials are concerned with the lack of support it is receiving from the government and what it may mean for renewable fuels future.

The return of hand-to-mouth buying in the global commodity market has elevated volatility. Import buyers have formed a pattern of buying larger volumes of needs on market breaks then turning silent as the market rallies. This has created even larger spikes in futures, but also deeper drops on the way down. While this has allowed importers to cover needs at what they feel is opportune times, is also puts them in a tight spot when sellers are not willing to move product and coverage is needed. It is quite likely that if the drought in the United States continues to intensify it will change this trend and elevate buying interest.

Basis values across the United States have started to slip lower. Basis is the difference between the futures and cash markets and is a good indicator of commodity supply. Basis values have been running at historically firm levels ever since the end of last fall’s harvest as buyers tried to get movement into the U.S. supply line. Farmers are now marketing the last of their old crop bushels and this is rapidly filling interior reserves. Basis is facing additional pressure from a lack of export demand, which means more bushels for interior processors at a lower value. The record sized crops out of South America are also pressuring all U.S. basis levels right now as these bushels are being offered at a sizable discount to the U.S.

The USDA has released its Farm Price Index for May with lower numbers across the board. Total farm returns in May 2023 were down 2.8 percent from April and down 5.6 percent from May 2022. Cash grain receipts were down 4.1 percent from April to May and down 2.4 percent from a year ago. Livestock returns were down 1.5 percent on the month but a large 8.2 percent on the year. The USDA also reported that prices paid for inputs were mostly steady from April and last May. The greatest expense decline was to nitrogen fertilizer.

RISK DISCLAIMER: The risk of loss in trading commodity futures and options is substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. The information contained in this report is believed to be reliable but is not guaranteed to accuracy or completeness by AgriVisor, LLC. This report is provided for informational purposes only and is not furnished for the purpose of, nor intended to be relied upon for specific trading in commoditot independent research and is provided as a service. As such, this is considered a solicitation.