Column: U.S. corn, soy futures seek direction beyond pivotal government data

4 minute read

Soybean plants around 45-days before harvest are seen on a farm near Norborne, Missouri, U.S., August 28, 2018. REUTERS/Dave Kaup/File Photo

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NAPERVILLE, Ill., June 29 (Reuters) - Chicago soybean futures have bounced, but corn has remained stagnant following last week’s selloff in both commodities, among the largest in years.

Volatility may return Thursday when the U.S. Department of Agriculture publishes its acres and stocks reports, known to create more commotion in futures markets than any other government data release.

In recent years, CBOT corn and especially soybeans have had more surges than collapses on June 30, though U.S. weather forecasts are also a dominant feature, weighing heavily on the market when they are favorable. The reports are due Thursday at 11 a.m. CDT (1600 GMT).

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Analysts see June 1 soybean stocks at 965 million bushels, implying record third-quarter demand. That would be 25% more than the year-ago levels, though fourth-quarter use in 2021 was substantially below normal, including export volumes only a third of recent levels.

The trade underestimated June 1 soybean stocks only twice in the last eight years, in 2014 and 2016, though futures reacted differently based on acreage results. However, November futures never returned to the June 30 levels in either year, with supportive weather outlooks a key commonality.

Trade biases for June soybean stocks, acres

ACRES

Analysts have not underestimated June soybean acres since 2014, though they were nearly dead-on in the following four years. They predict a decline in plantings to 90.4 million acres from 91 million in the March survey. read more

U.S. corn acres are seen rising to 89.9 million from March’s 89.5 million, which had surprised analysts to the low side at the time. June corn acres have not been bearish since 2019, when the market thought U.S. farmers gave up on the yellow grain in the face of horribly wet weather.

Corn planting was very slow this year but not as bad as 2019. Typically, slow planting does not facilitate a higher final corn acreage than in March, but bets are off for June.

Sowing was relatively quick last year, though analysts overestimated the June 2021 corn acres despite a record jump in prices between the March survey and peak planting season.

Interestingly, both the March and June 2021 trade guesses for corn acres were closer to the final than USDA’s June number, meaning the trade may not necessarily be wrong if a surprise ensues.

This year, December corn surged more than 20% from early March to mid-May, though November soybeans were largely unchanged during that period, supporting the idea of a shift toward corn. However, steep production costs and planting delays could have been prohibitive.

Trade biases for June corn stocks, acres

PRICE DIRECTION

Analysts peg June 1 corn stocks at 4.343 billion bushels, up about 6% from last year, but otherwise the lowest June 1 figure since 2014. That implies relatively average third-quarter demand.

The trade has a mixed track record on June 1 corn stocks, though CBOT corn futures have been much more reactive in the past to the acres result rather than the stocks, so a low acreage scenario is likely needed if prices are to claw back from last week’s plunge.

Soybean futures have bounced more than 4% since plummeting 8% over three sessions last week, though corn has made no headway since its 10% drop-off. Both contracts fell to near three-month lows last Thursday, when market selling was presumably heaviest.

The fact that June 30 falls at the height of the U.S. weather market has a lot to do with the data’s volatile nature, and that could come into play Thursday.

Adequate rain and moderate temperatures are expected for the first week of July, though Wednesday’s midday weather models suggested a possible return to dry weather toward mid-month, when a lot of U.S. corn will be pollinating. Soybeans will also start setting their pods in mid-July.

Karen Braun is a market analyst for Reuters. Views expressed above are her own.

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Editing by Leslie Adler

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As a columnist for Reuters, Karen focuses on all aspects of the global agriculture markets with a primary focus in grains and oilseeds. Karen comes from a strong science background and has a passion for data, statistics, and charts, and she uses them to add context to whatever hot topic is driving the markets. Karen holds degrees in meteorology and sometimes features that expertise in her columns. Follow her on Twitter @kannbwx for her market insights.