Acreage report lacks surprises, but highlights factors to consider

WASHINGTON—The latest government estimates for the area planted to wheat, corn and soybeans in the United States contained few surprises, but highlighted factors for buyers of flour and other ingredients to consider.

The U.S. Department of Agriculture, in its June 30 annual acreage report, estimated the area planted to non-hard spring wheat at 11.11 million acres, down 2.7 percent from 2021. The estimate was within the range of analysts’ pre-report expectations, but above the median expectation of 10,844,000 acres. The estimate included hard red spring wheat on 10.4 million acres.

“The fact that that number of acres was sticking together through all the talk about some of that going to the preventative plant because of the late start we had due to too wet conditions was important,” said Brian Harris, CEO and owner of Global Risk Management. . “With that, we’ve seen a pretty dramatic improvement in weather conditions for spring wheat, both in the US and Canada. That has been the main contributor to the weakness of the Minneapolis market compared to KC and Chicago this break. Minneapolis has been the downward leader since the report, and a lot of that probably had to do with that number.”

Wheat futures on all three exchanges have fallen more than 30% since hitting highs on May 17.

The June 30 report estimated that 1,976,000 durum wheat acres were planted, 3.1% higher than the March 31 prospective planting forecast and 20% higher than in 2021. Business estimates averaged 1,839,000 acres. Winter wheat planted area, estimated by the USDA at 34,006,000 acres in the June 30 report, decreased 0.7% from March 31, down 1% from 2021 and below the range of previous expectations. to the report.

For the flour buyer, the Acreage report is less critical to price direction than other factors, said Steve Freed, vice president of research at ADM Investor Services.

“The formula for bottoming out in commodities remains a lower US dollar, sustained higher Chinese demand and copper prices and a more dovish Federal Reserve,” he said. “Some feel that the next US consumer price index data could start to show lower inflation and by the fall, year-over-year inflation growth could drop to 1%. Some feel that the funds are not interested in buying grains until the shark, a recession, is out of the water.”

Spring wheat prices may have already hit their lows, Harris said.

“Keep in mind that even with some rebound in spring wheat this year, winter wheat stocks will still be at multi-year lows, so the wheat complex as a whole will continue to skid on a relatively thin layer of ice. thin,” he said. . “We are going to need large acres of winter wheat again this fall, in addition to a successful spring crop this year. So the best case scenario for a buyer is to look for something around $8.50 to $8.60 in December Minneapolis wheat as a target zone to buy.”

Adding pressure to wheat futures was data from Statistics Canada showing 2022 Canadian wheat planted area at 25,395,000 acres, up 9% from 2021 and the highest in nine years. The total included 18,212,000 acres of non-hard spring wheat, up 10.5%, 6,006,000 acres of durum wheat, up 9%, and 1,177,000 acres of winter wheat, down 13%. .

On June 30, the USDA also estimated 2022 soybean planted area at 88,325,000 acres, up 1% from the 87,195,000 acres in 2021, but well below the 91,955,000 acres forecast in the report. USDA prospective plantings as of March 31 and below 90,446,000 acres as average pre-report business estimates.

“It amplifies the need for the perfect growing climate,” Harris said. “If you take that new acreage number and reduce the yield that the USDA currently has plugged in by a half bushel or more, all of a sudden you find yourself with a new crop ending stock number below 100 million busses, which is extremely tight. We’ve seen it before, but not very often, and it certainly keeps the risk premium at market prices. We need to keep a close eye on that for the rest of the summer, especially during the critical period for soybeans in mid-August this year.”

The USDA estimated the area planted to corn for harvest this year at 89,921,000 acres, down 4% from the 93,357,000 acres in 2021, but above average business expectations and the 89,490,000 acres forecast in the USDA Prospective Plantings report dated March 31.

“If we can get out of pollination unscathed for the next three weeks as we move into July, I would expect December corn prices to pull back towards that $5.25 to $5.50 level,” Harris said. “In the case of soybeans, ending stocks will remain tight, which could still allow the market to go back to $12.50 to $12.75 as a resting zone, without any problem.”

USDA noted that due to the area not yet planted when data was collected between May 28 and June 16 for the Acreage report, it would collect updated data for the area planted to durum wheat, other spring wheats, corn, soybeans, oats , barley, and canola by 2022. , dry edible beans, sorghum, and sunflowers in the states of Minnesota, North Dakota, and South Dakota. If the changes are warranted, updated estimates of acreage will be provided in the Aug. 12 crop production report, the USDA said.

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