USDA's Latest Report Rocks Global Grain Markets: Are Prices Set to Soar or Plunge

US: After the United States Department of Agriculture delivered some surprising numbers on Friday, Soybean futures rose, and Corn futures plummeted. The annual Planted Acreage Estimates report revealed that there was a significant shift in US row-crop plantings from Soybeans to Corn. The report showed that the Corn area increased 6.2% year on year, totalling 38.08Mha - the highest since 2013 and third highest since 1944. According to the department's June report, the estimated Corn area saw a 2.3% increase from their March Perspective Plantings report. This is the biggest rise in Corn area between these two reports since 2007.

In contrast, the report estimated that the area planted with Soybeans was 33.79Mha - a decrease of 4.5% or 1.6Mha from last year, making it the fifth-largest planted area on record. This forecast was 4.6% lower than the March Prospective Plantings report and significantly lower than the average trade guess of 35.49Mha, missing the mark by 1.7Mha. The drop in Soybean futures prices that began in mid-April and continued through May appears to have influenced the shift to Corn. Farmers persisted in planting their swing area to Corn instead of switching to Soybeans as prices fell. However, the forecasted combined area planted with Corn and Soybeans decreased by 770,000ha, reflecting the impact of an unseasonably dry spring and early summer.

The United States Department of Agriculture (USDA) has reported that farmers had around 1 million hectares of Corn and 3.33 million hectares of Soybeans to plant as of June 1, which is a decrease when compared to the same time last year with 1.63 million hectares of Corn and 6.4 million hectares of Soybeans still unplanted. The unplanted Soybean area mainly represents the intended double-crop region, which will be sown post the winter Wheat harvest.

On Friday, the United States Department of Agriculture (USDA) published its quarterly Grain Stocks report, providing estimates of on-farm and off-farm inventories as of June 1. According to the report, Corn stocks have reached their lowest level in nine years at 104 million metric tons, 5.6% lower than the same date last year. On-farm stocks, which comprise 54% of the total, saw a 4.7% increase, but off-farm stocks declined by 15.4%. Additionally, Soybean inventories were reported to be 17.8% lower year on year, with 21.65 million metric tons in total. While on-farm stocks were only down by 2.6%, off-farm stocks - which make up 54% of the total - were 25.7% lower than the previous year.

Before the release of the report, November Soybean futures were trading flat on Thursday. However, just before the release, the futures saw a 2% increase as some market participants expected a bullish number. The report indicated erosion in the area, which was not anticipated, resulting in a significant surge of 6.6% at its highest point for the contract. Eventually, the day ended with the contract closing at a 6.1% increase, settling at 1343.25 US cents per bushel (A$740.75 per tonne).

The tighter-than-expected inventories further reinforced the buying trend, indicating that US Soybeans may require rationing in 2023-24.

December Corn futures were trading positively on Friday morning. However, as soon as the news was announced, the futures plummeted and closed the day down 6.4% at US494.75c/bul (A$292.34/t). This fall marked the seventh consecutive daily drop, which began after July's weather forecasts predicted a wetter season for the Corn belt, and some of the driest regions received much-needed rainfall towards the end of last week. The additional seeded area and the significant shift in the weather pattern outweighed the bullish stocks number.

Unfortunately, some Midwest growers faced devastation as a destructive derecho* swept through southeastern Iowa and northeastern Missouri before moving to central Illinois and southern Indiana last week. The windstorm, lasting for an extended period, brought gusts exceeding 160 km per hour in certain parts of Illinois, causing Corn plants to fall and grain-storage facilities to sustain damages. While much of the Corn that has fallen is likely to recover if the stalks remain intact, the storm's impact on pollination and yield projections is expected to be significant.

The Sorghum area in the US has risen to 2.75Mha, an increase of 7.6% or 194,000ha compared to last year. This exceeds the March Prospective Plantings report's projection by 336,000ha or 13.9%, but falls short of the final planted area in 2022 by 200,000ha or 6.8%. A weak harvest in 2022 has resulted in scarce inventories of 1.35Mt, which is a 51% YoY decline.

US farmers are also expanding their winter-cropping initiative, with Wheat planting areas growing by 8.5% YoY or 1.57Mha, reaching 20.08Mha. This is slightly less than the USDA's March planting update prediction.

The winter Wheat area in the US has increased by 11.2% YoY, reaching 14.98Mha compared to 13.46Mha last year. Out of this total, 10.4Mha is Hard Red Winter Wheat, 3.1Mha is Soft Red Winter Wheat, and 1.48Mha is White Winter Wheat. The USDA predicts farmers will only be able to harvest 69.5% of the planted area, which would be the lowest harvested ratio since 1933.

The spring Wheat area has also risen by 2.8% YoY, with growers planting 4.61Mha, which is 5.4% higher than earlier planting intentions reported to the USDA. The USDA expects farmers to harvest 95% of the planted area. However, the durum Wheat area has decreased from 660,000ha in the previous year to 600,000ha this year, which is 16.7% lower than the March projection.

Recent reports suggest that the Barley area has also increased, with this season's planted area reaching 1.36Mha, up from 1.19Mha last year and 1.1Mha in 2021. This final area is said to be 15% higher than the March Prospective Planting number.

As for the Wheat stocks, all Wheat inventories amounted to 15.79Mt, which is 16.9% lower than the previous year, with 79% held off-farm. On the other hand, Barley inventories have increased by 33.5% over the past 12 months to 1.23Mt, with 69% held in off-farm facilities such as mills, elevators, warehouses, terminals, and processors.

Following the release of the June 30 reports, the market is expected to shift its focus towards the better weather forecast for the Corn Belt and its effect on moisture deficits and crop ratings. The Midwest has been affected by the most significant US drought since 2012, which has resulted in a record Corn-yield potential being left behind. However, if the upcoming weather conditions remain favourable over the next few weeks, it is likely that there will be a temporary halt in the declining yield trend.