Morning Comments April 1, 2022

Black Dirt

Another bullish surprise for corn from the USDA yesterday as planted acreage came in well below pre-report expectations. Beans took it on the chin, while we saw some reasonable recalibration between wheat classes as unique supply and demand situations seem to be playing out in each wheat producing region of the country. 

Stocks figures for corn, soybeans, and wheat came in relatively close to pre-report expectations. Of note, we saw on-farm corn stocks at their lowest percentage of total supply since 2013. By state, we saw the biggest increases in supply in Iowa and Ohio with year over year jumps of over 51 million bushels each. Other increases were seen in Indiana, Illinois, Nebraska, and Michigan, where total supplies are nearly 17 million bushels higher than last year. 

Corn stocks were lower in Kansas, Missouri, South Dakota, and Minnesota, where the biggest year-over-year drop was seen- down over 114 million from a year ago. 

Soybean stocks came in slightly above pre-report estimates, with similar increases in by state supplies to corn. 

Wheat stocks were a bit lower than expected, with the reduction in by state supplies seen in the hard wheat regions after drought last year reduced production. Supplies were higher than last year in soft red wheat states, especially Michigan and Ohio.

As mentioned, acreage was the big surprise with the USDA putting corn plantings at 89.5 million, well below the pre-report estimate of 92 million and below the lowest guess ahead of the report. 

The South American drought pushing November beans to $15 while December corn seemed to tread water for far too long around $6.25 prompted many producers to look at increasing bean acres and cutting back on corn, especially when looking at input costs.

While the ratio has been moving back towards improving corn margin outlooks versus beans, the action to start the month clearly indicated bean acres would increase if price action was the only indicator. 

At nearly 91 million acres, soybean plantings will outpace corn plantings for only the second time in history if realized, with no major swing to beans seen in any particular state.

One thing of note is the increase in crop intentions outside the traditional corn and bean rotation, with small grains and cotton picking up some of the toss up acres in the Northern Plains and Mid-South. 

For carryout estimates using trendline yields, yesterday's acreage and USDA forum demand estimates for new crop would put corn at a 1.69 billion bushel carryout, with soybeans over 350 million bushels. Neither would be considered overly tight, but both use trendline yields that at least for corn would be a new record. 

Weather now becomes the key focus, with April looking to start very cold and very wet for much of the Eastern half of the country. 

Outside of yesterday's report we are watching continued developments between Russia and Ukraine. Peace talks resume this morning, though are now being held online as opposed to in person as both sides try to work through their differences. 

It does appear as though Russian troops are withdrawing from some areas surrounding Kyiv, though shelling and other aggression continue. At this point many believe the withdrawal is more in the way of a regroup than a retreat, with several factions of the Russian army nearly decimated over the last handful of weeks. 

In a somewhat surprising turn, reports from the Ukrainian ag minister have been increasingly upbeat this week, with current reported planting progress running ahead of last year with claims inputs and fuel aren't an issue. 

China continues to battle Covid, with cases continuing to surge and the Shanghai lockdown looking as though it will continue a bit longer than initially announced. Trouble with mass testing and issues with asymptomatic spreading is starting to impact logistics in and around Shanghai as well as throughout other regions of the country. 

Reports this morning indicate that movement of metal and other important raw goods for manufacturing from Shanghai ports have all but stopped, with March factory output figures already looking as though they will be the lowest since February 2020.

Testing and quarantine requirements appear to be limiting movement in the ag processing industry as well, with reports of several plants unable to move finished product or source soybeans because truckers refuse to travel or plant production is limited due to staffing.

Interesting to note, we did not get confirmation of any major corn purchases yesterday in the USDA flash reporting system, though it is possible we could see it this morning. 

Export sales yesterday continue to confirm global demand is not coming to the U.S. in as big a way as expected when the war initially broke out. Wheat sales were atrocious and on the low end of estimates, while corn sales were on the low end of expectations as well. Soybean sales were decent as Chinese state owned entities are working to rebuild supplies they intend to sell into the domestic market in upcoming auctions. 

Looking ahead, today starts a new quarter with a new outlook on what new crop production potential will look like. Focus now turns to weather, spring field work, and the soybean/corn ratio. The market's job now will be incentivizing an increase in corn acres from current levels by pressuring beans and supporting corn.

Corn Steady to 3 lower

Beans Down 1 to 3