USDA planting rattles soybean, corn outlooks as futures hit limits

The USDA’s influential quarterly update on planting has tripped off another huge rise in corn and soybean futures, as the agency failed to deliver an expected massive increase in planted area for both crops.

Average expectations had looked for corn plantings to increase from 91.1 million acres, as set out in the March update, to 93.8 million acres, with beans expected to jump from 87.6 million acres to 88.9 million acres.

However when the report was unveiled, soybean area was left unchanged at 87.6 million acres – up 5% on the previous marketing year, but well short of expectations.

Corn was pushed higher, but only by 1.6 million acres to 92.7 million, with the harvested area at 84.5 million acres – up just 2% on the previous year despite futures prices hitting multi-year highs.

The response from investors was instantaneous, reversing sharp losses in both corn and soybeans in the run-in to the report’s release, to drive both contracts towards trading limits.

New crop corn’s September contract, which had dipped as low as $5.40/bu earlier in the day, surged to hit the 40 cents up limit as prices rebounded sharply, while the September soybean contract moved from $12.96/bu at one point to hit $14/bu.

Wheat figures were also released, with the total planted area expected to come in at 46.7 million acres, just above the 46.2 million acres that analysts polled by Agricensus had looked for.

Nonetheless, the area amounts to the fourth smallest wheat area ever recorded, the USDA notes.

Nightmare scenario

For corn and soybeans, analysts had been warning that farmers had only limited space to raise their planted area given the price strength in both US staples – and historically the US has never planted over 180.3 million acres of combined corn and soybeans.

Expectations had looked for combined area of 182.7 million acres, but the USDA’s figures now pare than back to the 180.3 million acres – on par with the previous record.

The nightmare scenario for investors to contemplate now is that, with the Great Plains and parts of the Midwest facing drought conditions and more heat expected in the days ahead, the crops may struggle to hit record yields that underpin strong supply outlooks.

Currently the USDA is forecasting a corn yield of 179.5 bushels per acre, which would deliver a crop of 15.16 billion bushels (385 million mt), but any slip in that outlook will deliver a markedly smaller crop and place additional burden on already slim stocks.

In a parallel report, the USDA also slashed its outlook for corn and bean ending stocks to 4.1 billion bu (104.4 million mt) and 767 million bu (20.8 million mt) respectively.