Those once-raucous pits at the CBOT are long silent. But there’s still plenty of noise jostling the grain market headed into the peak of summer.
From weather forecasts to key USDA reports, opinions and analysis jockey for dominance as traders debate whether the glass is half full or half empty. After a holiday-shortened week with another on the way there’s plenty of time for talk – and plenty to talk about.
Here are a few of the questions on deck for just the next week.
- Are declining crop ratings a worry as June ends?
- Did farmers change corn and soybean seedings from original plans?
- Should you prepare for a slowing world economy or robust growth that bolsters interest rates and the U.S. dollar?
Conditions decline
Folks who pooh-pooh weekly USDA Crop Progress ratings and dismiss conditions as a beauty contest of questionable value, do so at their peril. Not all of the more than 3,500 reports are from bored secretaries or Extension agents just taking a guess. History suggests these ratings are a statistically valid tool for assessing production potential during the growing season.
Both corn and soybean conditions declined in last week’s tally. The percentage of corn fields rated Good or Excellent dipped from 74% to 72% with soybeans down 72% to 70%. But that deterioration is typical for mid-June and hardly reason to hit the panic button.
- For corn the reports translate to national yields from 179 to 181.5 bushels per acre – USDA’s June 12 World Agricultural Supply and Demand Estimates used a 181 bpa figure.
- It's still very early for soybeans, but here too the decline doesn’t mean disaster, with yield projections at or exceeding the 52 bpa USDA plugged into the June WASDE.
Acreage update
Yields are only part of production. Acreage also matters and the government updates that part of the equation June 28.
These revisions won’t be the last, either, as estimates are updated all the way until the “final, final” after the next five-year Ag Census.
Since the modern era of futures trading began 50 years ago, changes from farmer planting intentions in March are similar for both crops, at least in the aggregate. Each increased 29 times, falling 22 years into the June report. Both weather and economics are involved, along with government programs, but the numbers take nuance beyond the
headlines.
Average corn acres, for example, fell three-tenths of a percent in June compared to March intentions. But the median from 1973 through 2023 increased slightly. Sometimes farmers keeping planting corn as long as they can. Other years they toss those plans early. Last year June planted corn acreage rose 2.1 million acres while soybeans fell by 4 million. But in 1995 corn seedings were off 4.4% in the June report, while soybeans gained 2.7%.
It’s not a zero-sum game, either: Just because corn acres go up doesn’t necessarily mean soybeans will go down a like amount and vice-versa. Think about your own experience, and then multiply that by millions of farmers and toss in a series of updates along the way. All of this adds to the noise traders must process.
Moving target
The other report out June 28 also comes with a “to-be-continued” disclaimer. Old crop inventories left over at the end of the quarter are yet another “estimate” that can spark further debate, or head-scratching. In theory stocks from quarter to quarter reflect “disappearance.”
- Some years this speaks to demand being stronger or weaker during a quarter than expected.
- Other years changes reflect statistical error that’s present with any estimate.
Remember, nobody’s actually counting every kernel of corn. But as is the case with crop ratings, stocks data provides more clues about market dynamics.
For corn, changes in quarterly inventories speak to demand for livestock feeding – how much of the grain “walked” off the farm after being worked into rations. For all the advances in record-keeping over the years, the government has no way of monitoring this aspect of demand precisely. Figures on the amount of corn used in biofuels or exported come out weekly or monthly, and even these numbers are updated along the way.
This year June 1 corn stocks could come in around 5 billion bushels, the biggest in three, maybe four or five years.
Soybean demand may be easier to track, but exports and crush can also vary from initial estimates, impacting how many beans are around.
What about China?
As usual, China figures into all these numbers, especially soybean exports. Total U.S. exports to all customers are down around 17% year-to-date, but China’s account is off by nearly a quarter from last year. That could reflect concerns about tariffs, or China’s ongoing economic uncertainty and changes in costs due to currency fluctuations in the U.S. and Brazil.
Market expectations about the Federal Reserve and the direction of U.S. monetary policy also change with the wind. Hopes for a quarter of 1% cut in rates come September remain alive, but the central bank may not begin easing until the end of the year, after stock indexes rose to new records last week before pulling back a little.
In other words, it could just be noise. But traders must decide, and then get ready for July, with Independence Day the next date circled on the market’s calendar.