Markets react to surprising corn acres

Soybean prices follow | USDA found farmers planted two million more acres than expected, hitting 97.38 million

Surprised traders pushed crop and livestock prices down when the U.S. Department of Agriculture reported two million extra acres of corn growing in American fields than what traders expected.

The USDA reinforced the market’s negative mood when it came to crop prices this year, and that’s not good for anyone still needing to price 2013-14 crops, some analysts say.

Not only did corn prices fall, but so did prices for new crop soybeans and wheat.

The soybean price fell regardless of slightly bullish numbers in USDA’s quarterly stocks and planted acreage reports.

“The wheat markets, except Minneapolis, have taken out key support levels,” said Lorne Boundy of Paterson Grain.

“That’s not a very optimistic outlook if you’re not forward sold on a few bushels.”

The market sell-off was inspired by the USDA’s finding that farmers planted two million more corn acres than analysts expected, pushing the total to 97.38 million.

Analysts and traders had believed for weeks that late, cold and wet springs lead to fewer corn acres and more soybean acres. The corn acreage, the largest since 1936, combined with normal weather for the rest of the season, will take most of the pressure off the corn market, said Errol Anderson of Pro Market Communications.

“There’s going to be lots of corn,” he said. “It kind of feels like the December (corn futures) contract could break down below $5 now.”

Soybean plantings were a record 77.728 million acres, up one percent from last year, but 200,000 acres lower than the average forecast.

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Farmers could harvest a record 13.9 billion bushels of corn, a record 3.4 billion bushels of soybeans and medium-sized two billion-bushel wheat crop, USDA’s planting figures suggested, with normal weather and yields.

The prices of crops traditionally grown in Western Canada, such as canola and spring wheat, generally did better than the giant U.S. Midwest crops on the day the report came out.

Hard red spring wheat futures fell only about half as much as other wheat futures.

Traders said this reflected poor protein levels in the winter wheat zones, as well as northern spring wheat crops struggling with wet soil in some areas.

Wheat plantings in North Dakota, the No. 2 producer, were down 10 percent from what growers planned in March.

The USDA said U.S. durum seeded area was 1.54 million acres, down from the trade’s expectation of 1.699 millon. Durum area is down 28 percent from last year.

The weakness in corn is likely to undercut barley prices, which had already been falling in recent weeks, Anderson said.

“It definitely won’t help.”

Anderson thinks current southern Alberta barley bids of $220 per tonne could drop another $10 to $15, which would drop Saskatchewan cash bids below $4 per bushel in some areas.

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Soybeans and canola weakened after the report was published as the entire crops complex softened with the news that corn stocks at the end of 2013-14 would likely rebuild more with the new crop.

Canola has been weakened by poor soy oil prices, and the smaller acreage and lower stocks of soybeans in the USDA reports weren’t significant enough to make either crop rally.

Oats was also relatively strong after the report came out, with new crop initially falling less than most crops.

However, Boundy thinks oats will eventually be dragged down by corn.

“As usual, oats will wait until a little later,” said Boundy.

Not only are corn prices under pressure, but American farmers seeded more oat acres as they ran out of time to seed other crops.

“Once some of the funds realize that, they’re going to come in and sell a bit,” said Boundy.

Ken Ball of PI Financial said the sell-off inspired by the USDA reports reveals a market with weakness at its heart, and the bigger corn number was the worst thing it could find.

“Corn’s weighing on everything,” said Ball.

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“It was pretty neutral for (soy)beans, and they’re down 17 cents anyway. It tells you the underlying tone of the market.”