The area ratio has a few surprises…

WASHINGTON — The U.S. government’s latest estimates of acreage planted to wheat, corn and soybeans contained few surprises but highlighted factors for buyers of flour and other ingredients to watch out for.

The U.S. Department of Agriculture, in its June 30 annual acreage report, estimated non-durum spring wheat seeded acreage at 11,110,000 acres, down 2.7% from 2021. The estimate was within the range of analysts’ expectations ahead of the report, but above the average expectation of 10,844,000 acres. The estimate included hard red spring wheat at 10.4 million acres.

“The fact that this acreage count stood up to all talk about part of this part of the preemptive plant due to the late start we got due to the wet conditions was significant,” said Brian Harris, executive director and owner of Global Risk Management. . “With that, we’ve seen quite a dramatic improvement in weather conditions for spring wheat, both in the United States and Canada. This has been the primary contributor to Minneapolis’ market weakness relative to KC and Chicago during this pause. Minneapolis is the leader in the decline since the report, and a lot of that is likely due to that number. »

Wheat futures on all three exchanges have fallen more than 30% since hitting highs on May 17.

The June 30 report estimated that 1,976,000 acres had been seeded to durum wheat, up 3.1% from the March 31 forward seeding forecast and up 20% from 2021. Trade estimates averaged 1,839,000 acres. Winter wheat seeded area, estimated by the USDA at 34,006,000 acres in the June 30 report, was down 0.7% from March 31, up 1% from 2021 and below the range of expectations ahead of the report.

For the flour buyer, the Acreage report is less critical to price direction than other factors, said Steve Freed, vice president of research at ADM Investor Services.

“The formula for a commodity bottom is always a lower US dollar, higher and more sustained Chinese demand and copper prices, and a more dovish Federal Reserve,” he said. “Some think the next U.S. consumer price index data may start to show lower inflation and by the fall, the year-over-year inflation increase will another could drop to 1% Some believe the funds are not interested in buying grain until the shark, a recession, is out of the water.

Spring wheat prices may have already bottomed out, Harris said.

“Keep in mind that even with some rebound in spring wheat this year, winter wheat stocks will still be at multi-year lows, so the wheat complex as a whole is still going to skate on a relatively thin ice,” he said. . “We will still need large acreage of winter wheat this fall, in addition to a good spring crop this year. So the best case scenario for a buyer is to look for something around $8.50-$8.60 on December Minneapolis Wheat as a target zone to buy.

Statistics Canada data added pressure on wheat futures prices to Statistics Canada data that showed total acreage seeded to Canadian wheat in 2022 was 25,395,000 acres, up 9% from 2021 and the highest in nine years. The total included 18,212,000 acres of non-durum spring wheat, up 10.5%, 6,006,000 acres of durum wheat, up 9%, and 1,177,000 acres of winter wheat, down 13%.

On June 30, the USDA also estimated 2022 soybean seeded acreage at 88,325,000 acres, up 1% from 2021’s 87,195,000 acres, but down sharply from the projected 91,955,000 acres. in the USDA’s March 31 Prospective Plantings report and below 90,446,000 acres as the average of pre-report trade estimates.

“It amplifies the need for the perfect growing climate,” Harris said. “If you take that new acreage number and reduce the yield that the USDA currently plugged in by a half bushel or more, you suddenly end up with a new carryout stock number of less than 100 million busses, which is extremely tight. We’ve seen it before, but not very often, and it certainly keeps the risk premium in market prices. We need to watch this closely throughout the summer, especially during the critical soybean pod set up in mid-August this year. »

The USDA estimated the area planted with corn for harvest this year at 89,921,000 acres, down 4% from 93,357,000 acres in 2021, but above both average trade expectations and of the 89,490,000 acres projected in the USDA’s March 31 Prospective Planting report.

“If we can get through pollination over these next three weeks unscathed as we move into July, I would expect December corn prices to move back towards that $5.25 to $5.50 level” , Mr. Harris said. “On soybeans, closing stocks will still be tight, which could still allow a market to move back towards $12.50 to $12.75 as a rest zone, without any problems.”

The USDA noted that due to the acreage still unplanted when data was collected between May 28 and June 16 for the acreage report, it would be collecting updated data for planted acreage in 2022 for durum wheat, other spring wheat, corn, soybeans, oats, barley, canola, dry edible beans, sorghum and sunflowers in the states of Minnesota, North Dakota and South Dakota. If changes are warranted, updated acreage estimates will be provided in the Aug. 12 crop production report, the USDA said.