- Much of what USDA will release at the end of March in its Prospective Plantings and Quarterly Stocks reports has already been shown to us by the markets.
- Regarding plantings, the Nov24 soybean/Dec24 corn futures spread favored more soybeans acres from last September through this past February, the key 6-month pricing period.
- As for quarterly stocks, national cash indexes (national average cash prices) showed increases across the board from a year ago.
For whatever reason, most folks in the ag industry can’t get enough when it comes to “guidance” from USDA. They wait impatiently every week, month, quarter, and so on for the latest handout of manna from their beloved government agency, paying no mind to the reality these numbers are imaginary. I’ve said this for years, for decades, yet nothing has changed. Like turkeys drowning from looking up at the sky during a rainstorm, I can’t stop people from treating these reports as if they are important. Ag media tells them it matters. The majority of talking heads in the industry (amazingly enough, most of them tied to a brokerage outfit), tell people to trade and/or make marketing plans around report days. And so it goes. Before we get into the discussion, let me ask you this: If you were running an investment fund in grains, would you rely on imaginary numbers that are at least a month old upon release? None of the investment companies I visit with do, so there’s that. Lastly, this is not my thoughts on what USDA will say when it releases its guesses. I don't play that silly game. This is analysis of what the markets were showing us at the time.
Let’s start with expected 2024 US planted area. If you’ve been following along you’ll know I track the November soybean/December corn futures spread each year to get a read on what the market is telling us about expected changes to planted area. I track this spread from September 1 the previous year through the end of February, the key 6-month timeframe when planting decisions are made. I look at the weekly closes of the spread itself, the average of those weekly closes, and how both compare to the previous 10-year averages along with highs and lows. The higher the spread (Nov soybean price divided by Dec corn price), the more soybean acres to be planted. The lower the spread, the more corn acres to be planted. It’s not rocket science. Here are some of the key numbers for the 2024 spread:
- The previous 10-year average weekly close was 2.4 (No, not 2.5 that the majority like to quote.)
- The 2024 spread showed an average weekly close of 2.49, indicating planted soybean acres would gain on planted corn acres this spring
- The nearest previous year, by average, was 2014 coming in at 2.46
- For the record, using daily closes only of the two new-crop contracts for US government insurance base price purposes during February
- Nov24 soybean averaged $11.55
- Dec24 corn averaged $4.66
- Putting the spread at 2.48
- With the closest fit again being 2014 at 2.46
Also for those of you who have been following along, 2014 will ring a bell as I’ve talked a lot about how the National Corn Index has been following a similar path from 2020 through 2024 to what was laid out during 2010 to 2014. A decade ago, US producers reportedly planted 5% fewer corn acres (than the previous year) and 8.5% more soybean acres. Given that, the NCI stayed under pressure through September 2014, posting a low monthly settlement near $2.8375. From there the NCI rallied to a high monthly close near $3.7275 (December 2014) before settling into a long-term sideways trend until December 2020 (note the start date in relation to the latest pattern).
If you are getting the shakes from USDA withdrawal, keep in mind the March 28 numbers will NOT be the first look at 2024 acres as advertised, but rather the third.
- February 14, 2024: USDA Baseline Projections (done by the Economists for bookkeeping purposes)
- Corn: 91.0 million acres (ma), down 4% from 2023’s reported 94.6 ma
- Soybeans: 87.0 ma, up 4% from 2023’s reported 83.6 ma
- All Wheat: 48.0 ma, down 3% from 2023’s reported 49.6 ma
- Upland Cotton: 11.7 ma, up 16% from 2023’s reported 10.1 ma
- February 15, 2024: USDA Annual Outlook Forum (done for ag media purposes)
- Corn: 91.0 ma, down 4% from 2023’s reported 94.6 ma
- Soybeans: 87.5 ma, up 5% from 2023’s reported 83.6 ma
- All Wheat: 47.0 ma, down 5% from 2023’s reported 49.6 ma
- Cotton: 11.0 ma, up 7.5% from 2023’s reported 10.23 ma
Quarterly stocks as of March 1 don’t get much attention, and rightfully so given the market has long moved past that supply and demand marker. Still, what were the cash markets telling us at the end of February 2024 about available stocks-to-use (as/u)?
- The National Corn Index (ICY00) was calculated near $4.00, putting as/u at 12.9%
- The end of February 2023 saw the NCI at $6.36 and as/u of 9.1%
- The National Soybean Index (ISYY00) was calculated near $10.80, putting as/u at 12.2%
- The end of February 2023 saw the NSI at $14.46 and as/u of 4.4%
- The National SRW Wheat Index (IWY00) was calculated near $5.25, putting as/u at 42.6%
- The end of February 2023 saw the SWI at $6.58 and as/u of 35%
- The National HRW Wheat Index (IHY00) was calculated near $5.41, putting as/u at 41.5%
- The end of February 2023 saw the HWI at $7.83 and as/u of 30.6%
- The National HRS Wheat Index (IPY00) was calculated near $6.42, putting as/u at 39.8%
- The end of February 2023 saw the HSI at $8.36 and as/u of 31.3%
The bottom line is stocks on hand in relation to demand as of March 1, 2024 were larger than what was calculated for March 1, 2023, with the most substantial gain seen in soybean available stocks-to-use. What makes this development more interesting is the US presumably planted fewer acres of soybeans last spring, something foretold to us by the 2023 edition of the futures spread that averaged 2.26 (nearest fit being 2016 at 2.24). Reportedly for 2023, US producers planted:
- 83.6 ma of soybeans, down 4% from 2022
- 2016 reportedly saw 83.5 ma of soybeans planted, up 1% from 2015
- 94.6 ma of corn, up 7% from 2022
- 2016 reportedly saw 94 ma of corn planted, up 7% from 2015
In closing, for those of you trembling in uncontrollable anticipation of USDA’s numbers, I’ll quote the great philosopher Dale Gribble from King of the Hill, “Feel free to wet yourselves. The splash at the bottom will cover your shame.”
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.
