- Last Friday's USDA Acreage Update numbers for corn and soybeans are almost spot-on with what was reported as “final” planted area for the 2016 crops.
- This fits with what the Nov23 soybean/Dec23 corn spread during the 6 months from September 2022 through February 2023.
- Given the continued similarity, attention is already turning to what the 2024 edition of the SX/CZ spread is showing us.
As you might expect, one of the more popular questions I’ve received since last Friday is my thoughts on USDA’s acreage update. Most of the attention has been on corn and soybean planted area, and rightfully so, with USDA raising its corn estimate by 2.1 million acres (ma) from the March 31 Prospective Plantings guess to 94.1 ma (keep that number in mind, 94.1 ma). This was a 6% increase (roughly) from the latest official guess on 2022’s corn planted area of 88.6 and in line with what I wrote as a possibility in late February 2023.
Recall from that piece, “Dec23 corn spent the last 6 months (September through February) buying acres away from Nov23 soybeans…While I don’t believe in analogous years, the closest fit to what we saw with the 2023 edition (Nov soybeans/Dec corn) was back in 2016 when US growers planted approximately 7% more corn acres...” So the stage was set for USDA’s acreage number to be larger in the end of March silliness, but it wasn’t. Given that, it increased the odds of it happening in the June update. Why funds seemed so surprised by last Friday’s figure is a bit of a head-scratcher.
But the corn and soybean story doesn’t end there. In its January 2016 Supply and Demand report, USDA pegged 2015 planted corn area at 88.0 ma, soybeans 82.7 ma, and all wheat 54.6 ma. Fast forward to the same report for January 2023 and we see corn at 88.6 ma, soybeans 87.5 ma, and all wheat at 45.7 ma. I’m going to drop wheat from the discussion at this point (though I may pick it back up again), and put the spotlight on corn and soybean. What jumps out at me most is what we’ve seen in the Nov bean/Dec corn (SX/CZ) spread.
As I mentioned in the March piece, the 2016 SX/CZ showed a 6-month (September through February) average weekly close of 2.24. This was below the long-term average of roughly 2.5, meaning the 2016 spread favored more corn acres planted in the spring of that year. When all was said and done, reportedly, US producers had planted 94.0 ma of corn and 83.4 ma of soybeans. That was a 7% increase in corn area and a 1% increase in soybean area. But do those numbers sound familiar to you? They should, for last Friday’s Acreage Update came in at 94.1 ma of corn (remember, I asked you to keep that number in mind) and 83.5 ma of soybeans. Both were nearly spot-on with what we saw planted in 2016. As for the 2023 SX/CZ spread, it averaged 2.26 as compared to the 2016 average of 2.24. All the numbers line up.
What about as we move ahead now, though? Given I usually start tracking SX/CZ when the calendar page turns to September, an early look at the 2024 edition (ZSX24) (ZCZ24) shows this past Monday’s close at 2.74 as compared to the previous 10-year average weekly settlement (again from September through February) of 2.4. Again, taking a look back in time and we see the 2017 edition of the spread posted an average weekly close for those six months of 2.58. Does this mean Nov soybean futures bought acres back from Dec corn? USDA’s January 2018 report showed US soybean planted area of 90.1 ma, an 8% increase from 2016, while corn dropped 4% to 90.2 ma.
How did the markets react? The 2017-2018 marketing year saw the Barchart National Corn Price Index (ZCPAUS.CM) closed August 2017 at roughly $3.05. The NCPI then rallied to a high of $3.74 during May 2018 before closing August 2018 near $3.21. The Barchart National Soybean Price Index (ZSPAUS.CM) finished August 2017 near $8.84, rallied to a high of $9.98 during March 2018, and settled August 2018 at $7.50. As of this past Monday’s close the NCPI was priced at $5.2650 while the NSPI came in at $14.95.
So, what’s next for US corn and soybeans? All the statistics tell us to expect Nov24 soybeans to buy acres away from Dec24 corn by the time we get to September. Additionally, cash corn is still on the path laid during the 2010-2011 marketing year through 2013-2014, with the market not bottoming until July 2014. This indicates the 2020-2024 cycle could see cash corn stay under pressure through at least the spring of 2024. As for soybeans, the cash market’s monthly close-only chart also looks vulnerable to a selloff despite the rally in late June. With 2023 supplies expected to tighten, this tells us demand should continue to be an issue for the foreseeable future. The statistics also indicate rallies in soybeans could be viewed as selling opportunities for both the 2023 and 2024 crops.
I feel obligated to close with the famous quote from Mark Twain, “There are lies, damned lies, and statistics.” That should keep things interesting in corn and soybeans.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
