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Closing Comments

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Closing Comments

USDA shocked the trade with their survey estimate today of farmer’s intentions to plant 93.6 mln acres of corn in 2016 – 5.6 mln acres more than were planted in 2015. Their survey also showed farmers will be dropping their spring wheat acres to the lowest level since 1972. The survey was completed the first two weeks of March among 83,000 farmers through mail, internet, telephone or personal interviews.

Some head-scratching going on with situations like Illinois planting more than 500,000 more acres of corn, soybeans and wheat combined as all three of those crops are seeing acreage expansion. A USDA representative attributed the expansion to the loss of acres in sorghum, hay and oats in IL…

The USDA also released its quarterly stocks estimates for corn, soybeans and wheat which came in essentially at the trade expectations.

Corn

Corn shocker as the intentions for planted acres exceeds the highest trade estimate by 2.6 mln acres.
According to the USDA, farmers intend to plant 93.6 mln acres of corn for 2016, up 6 percent from last year and 3 percent above 2014. If actually realized, this would be the third most acres planted to corn since 1944. 41 of 48 estimating states are showing increases in planting acres. States planting less acres; Arizona, Connecticut, Massachusetts, Montana, New Hampshire, New Jersey and New Mexico – not exactly corn powerhouse states.
Sorghum growers are expected to plant 7.22 mln acres, down 15 percent from last year. Kansas and Texas plant 74 percent of the US acreage.
Quarterly stocks as of March 1 totaled 7.81 mln bu, up 1 percent from a year earlier and just above the average trade estimate of 7.80. Supplies on-farm are actually down 1 percent from a year ago while supplies in elevators were up 3 percent. Disappearance during the quarter was 3.43 bln bu, compared with 3.46 bln a year earlier.
While this was certainly a disappointment as planting nears, we have now likely seen the largest acreage number for corn that we will see this year as acres in the Delta have already begun switching to soybeans due to delayed corn planting. In addition we will see ‘swing’ acres in the Midwest move yet to soybeans as the rally the past three weeks brought the corn/soy ratio to the most favorable relationship to soybeans since summer of 2014.
Now that the USDA cat is out of the bag and we won’t have acreage adjustments until June 30, the trade will look now to weather for planting and production.
Technically the May contract made it back to within a penny of summer front month lows before running out of sellers on today’s session. The weekly bar will finish printing tomorrow and my ‘druthers’ have me looking for a Friday close above 3.54 May to stay within the current uptrending zone.
While the additional acres add to the buffer and the market will move comfortably move toward the 2+ bln bu carry-out prospect, the crop still has to be planted and raised.
For today funds took the news as a trigger to be big sellers. Traders had a hard time estimating fund activity on the largest volume day in nine months – but estimates ranged from 25,000 to 65,000 contracts sold by the funds.

Soybeans

Soybeans close higher on ‘as expected’ stocks and loss in expected planted acres.
Growers intend to plant 82.2 mln acres in 2016, down less than 1 percent from last year. Compared to last year, intentions will be the same or lower in 23 of 31 estimated states. This came within trade expectations but below the average estimate.
Stocks for soybeans as of March 1 totaled 1.53 bln bushels, up 15 percent from the previous year. Stocks on farm are estimated at 728 mln bu, up 19 percent from a year ago while stocks in elevator were up 12 percent. Disappearance for the quarter was 1.18 bln bu, down 1 percent from the previous year’s quarter.
USDA export sales for soybeans came in under expectations while sales of meal and soy oil came in within expectations.
Funds were estimated buyers of 3,000 contracts of soybeans.
Technically the November contract retreated after the report release and tested the top of the wedge the market broke out of on the 22nd before retreating back up to close higher on the day. The front month contract still has upside targets plausible to 9.28 and 9.50 – May closed at 9.10 ¾ today.

Wheat

Wheat closes near highs despite large stocks on larger than expected losses of acreage.
All wheat combined acres are estimated to be 49.6 mln acres, the lowest since 1970 and a million acres below the lowest trade guess.
Actual winter wheat acres are estimated at 36.2 mln acres, down 8 percent from last year and 1 percent from the previous estimate.
Area seeded to Durum wheat is estimated at 2.0 mln acres, up 3 percent from 2015.
Spring wheat acres show a drop of 14 percent from 2015 to 11.3 mln acres. This would be the lowest since 1972.
All wheat stocks as of March 1 was estimated at 1.37 bln bushels, up 20 percent from a year ago. For the quarter disappearance was estimated at 375 mln bushels, 4 percent below a year ago. A combined view of ND, SD, MT and MN would have wheat stocks at the highest level since 98/99.
USDA export sales for wheat came in at the high end of expectations.
Supplies will continue to weigh on the wheat complex for now but the lower planted acres and the softening dollar should give Chicago wheat opportunity to a 4.90-5.00 resistance zone, KC around 5.10 and Minneapolis front month to the 5.35-5.45 area.

Livestock

Cattle higher, feeder cattle limit up on cheaper corn prospects while hogs lower on slower start to grilling than expected.
The bearish USDA Prospective Plantings gave feeder cattle futures a boost on the prospect of cheaper feeding costs expected moving forward. The CME feeder contracts were limit up across all months and will trade on expanded limits tomorrow. The strength in the cattle complex came despite the weaker boxed beef prices today and the concern over lower cash cattle trade tomorrow.
CME lean hogs were lower across the board as funds trim positions on concern over slower grilling demand than had been previously expected. Demand looks to be fairly supportive for now though as the cutout was up $1.27 per cwt today and continued profitable packer margins.

Closing Market Snapshot

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All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading and may not be suitable for all investors.

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