KANSAS CITY — Grain traders and ingredient buyers were heading into the 2024 season with uncertainty amid questions about the corn, soybean, spring wheat and total planted area projected in the US Department of Agriculture’s March 28 Prospective Plantings report. Many expect significant changes to be reflected in the June 28 Acreage report, depending on spring planting weather that currently favors early corn planting. Meanwhile, analysts note the summer growing season depends on the development of a warmer, dryer La Nina weather pattern.

While winter wheat acreage is mostly known, planting of corn, soybeans, durum, spring wheat other than durum and most other crops are in the early stages. The USDA said corn planted in the 18 major states as of April 7 was at 3%, about average for the date and mostly in states outside of the major-producing Corn Belt region. No aggregate soybean planted estimate was provided, although planting was underway in southern states.

Weaker wheat prices expected

Assuming normal weather as the winter wheat crop progresses and corn and spring wheat crops are seeded, wheat futures could feel a downward tug in early summer, said analysts interviewed by Milling & Baking News.

With harvest a few months away, the wheat outlook for 2024 in large part hinges upon weather. Domestically, in the Southern Plains, winter wheat condition ratings when the USDA resumed its weekly Crop Progress report April 1 were the best for early spring since 2019. Conditions have moved in mixed directions since: mostly steady in the five principal soft wheat states, improved in the central and northern Plains and worsened in southern and western areas of the hard red winter wheat production area.

A smooth planting season for US corn could weigh on corn futures and, in turn, on wheat. At the same time, the market will be influenced by progress of spring wheat planting, which by April 7 was 3% complete, ahead of 1% a year earlier, the same as the 2019-23 average for the date, and concentrated mostly in the Pacific Northwest. Northern Plains farmers still have time to select among a wide roster of crops that thrive in the region — including spring wheat, soybeans, canola, barley, rye and numerous dry edible beans — before planting in earnest in late April and May.

While analysts expect wheat price weakness this summer, the near-term outlook was described as less bearish. Concerns about dryness in Russian growing areas boosted wheat futures in the second week of April, though some analysts indicated May and June conditions would be more indicative of production there. Australia and Canada may be the crops to watch, said Mike O’Dea, risk management consultant, StoneX, Kansas City, the latter “because they pulled stocks down pretty hard.”

“You take two to three bushels yield off US spring wheat, all of a sudden US stocks get a little tighter, too,” he said. “They’re going to have less production in Europe on soft wheat. So you actually kind of create a little situation where global production becomes more of a picture versus the last couple years. I think we’ve hit some short-term lows in the markets here. There’s very little weather risk premium in the market right now. I would say there’s some in KC, but nothing much else in any other markets right now. So that’s what we’re going to focus on is Canada/US border Plains plus Australian planting. Our contacts down there are really concerned about western Australia and southern Australia. There’s plenty of rain in the east. We’ll just have to see if WA (Western Australia) and SA (Southern Australia) get any rain.”

Already baked into prices were acreage estimates from the Prospective Plantings report all-wheat plantings for harvest in 2024 was forecast at 47,498,000 acres, down 4% from 49,575,000 acres in 2023 but up 4% from 45,769,000 acres in 2022. Broken down by class, the USDA estimated 24.3 million acres had been seeded to hard red winter wheat, 6.26 million acres to soft red winter and 3.59 million acres to white winter. The report projected northern Plains farmers would seed 10.7 million acres to hard red spring wheat and 2.03 million acres to durum wheat.

The extent of the decrease in acreage in soft winter wheat country surprised some analysts. So, too, did the increase in spring wheat acres, likely the result of wheat following increased corn acres in crop rotations and reduced barley and sunflower acres across the northern Plains.

“It kind of fits the pattern of lower prices giving less enthusiasm about planting crops this year than the trade had expected,” said Bill Lapp, founder and president of Advanced Economic Solutions, Omaha, Neb. “We saw that in corn, soybeans, and now winter wheat. A 17% decline in plantings of soft red winter caught my eye as being a little bit dramatic. Last year was a big surprise when it was 7.66 million acres. This year, going down 17% is a little bit of a shock and awe, too. Hard wheat acreage is down from last year, but it’s still the second largest in nine years.”

Also out March 28 was the USDA’s estimate of grain stocks on hand as of March 1. Wheat stored in all positions totaled 1,087 million bus, up 16% from a year ago. At an estimated 272 million bus, wheat stored on farms was estimated up 20% from a year ago, while off-farm stocks were estimated at 816 million bus, up 14% from last March. The figures were about what analysts expected.

“It highlights the lack of selling by the spring wheat farmer,” O’Dea said. “Northern Plains stocks are big both on farm and off. You can see that reflected in the structure of the futures market, too, because you’ve got that big commercial long versus the fund short in Minneapolis wheat. That’s just the exporters and the millers buying cash wheat and not having the farmer sales against it, and they’re just buying futures.

“The real question is when does this spring wheat farmer sell. And that’s what that stocks number up there reflects. Now if we stay dry, maybe they just hang on to their stocks like they did for the past few years. Think back to the market rally from the Russia/Ukraine thing. The class that really benefited the most was spring wheat, where the farmer had on-farm stocks to sell into that rally. The fact that they have more storage up there than other classes means they could potentially carry a lot more over into new crop and beyond.”

It all adds up to sliding prices, unless a major crop problem develops.

“With normal conditions or better continuing in the major growing areas and corn off to a reasonable start, the market’s likely to feel some pressure,” Lapp said. “Maybe not in the next two weeks, but once we get into May and we’ve got a sizable share of the corn and soybean crops in the ground and off to a start and no weather problems in the Southern Plains, we should see Kansas City start to drop and Chicago to follow. It’ll depend on the weather up north, but Minneapolis could follow, too, if we get planting off to a good start in the Northern Plains and the Prairie provinces.”

O’Dea, too, was bearish Kansas City wheat futures and suggested Chicago and Minneapolis wheat would likely decline.

“With the hard red winter wheat crop potential, I don’t know why Kansas City doesn’t run it down to $5 to $5.20 a bu in July,” he said. “We have to run prices down to create some demand if we’re going to have any kind of export market. KC wheat’s got to get real cheap. Chicago’s probably fairly priced, maybe $5.40 to $5.50 a bu to the downside. Six bucks is kind of downside for Minneapolis. The way I look at this, say we take KC to $5. Chicago’s probably $5.20@5.30 because Chicago ought to trade a 20¢ to 30¢ premium to KC this year. And Minneapolis still should trade a 70¢ to $1 premium to KC.”

Soybean acreage seen gaining

As expected, the USDA in its March Prospective Plantings report said farmers intend to plant more soybeans this year than last year, but some analysts are doubtful farmers will dedicate as many acres to soybeans as indicated in the USDA’s initial outlook for the 2024 crop.

“I definitely do not believe that the numbers we saw on Thursday (March 28) will be anywhere close to final,” said Brian Harris, executive director and owner of Global Risk Management, Tampa, Fla. “The corn numbers are way too low, and the bean number is modestly too high.”

In the report released March 28, the USDA said farmers intend to plant 86,510,000 acres to soybeans this spring, up 3.5% from 2023, with growers in 24 of the 29 soybean-growing states expected to maintain or expand their soybean acreage. Increases of 100,000 acres or more are anticipated in Arkansas, Illinois, Indiana, Iowa, Kentucky, Louisiana, Michigan, Minnesota, Missouri, North Dakota, Ohio and South Dakota.

Soybean futures initially slid after the report was published but recovered ground and were mostly unchanged by the closing bell on March 28, indicating an overall neutral reaction to the reports despite the conventionally bearish-leaning data for soybeans.

“I think a fair amount of the trade is not taking these numbers at face value given that they are just intentions,” Harris said, adding that many US farmers typically prefer planting corn and may end up sowing more acres to corn over soybeans once planting begins.

“The soybean number is probably closer to 85,900,000 acres,” he said.

With the record 2023 US corn production and the domestic carryout exceeding two billion bushels, dedicating more 2024 acres to soybeans over corn makes sense at a surface level. But deeper market fundamentals indicating a surplus of soybeans, just like a surplus of corn, suggest soybeans may struggle to gain traction on the global market, especially with South America generating massive production in recent years.

“Exports are a very large piece of the pie for us, but we haven’t been competitive with Brazil for most of the year,” Harris said. “The last I looked, we were running 16% to 17% behind last year of total soybean exports out of the United States, and I don’t see why that trend won’t continue going forward if South America is still able to produce these kinds of crops.”

In 2022-23, Brazilian soybean production reached a record at 162 million tonnes, which was 39% more than the 116.22 million tonnes the United States produced in the same marketing year. Brazil had expected to surpass that amount in 2023-24, reaching another all-time high in soybean production, but persistent spells of hot and dry weather during its growing season have stressed the crops, leading analysts to make successive cuts to production forecasts. The latest data from the USDA attaché outpost in Brazil pegs 2023-24 Brazilian soybean production at 152.6 million tonnes, down from the Department’s prior forecast of 155 million tonnes in its March 8 supply-and-demand report. Many private analysts expect final production to be even lower.

“We took the high end off Brazilian production this year, but you’re still talking about a crop that’s probably somewhere between 145 million to 148 million tonnes, and that’s a big crop,” Harris said.

To put this scale into perspective, even if Brazil only produced 145 million tonnes of soybeans this year, that is still 16% higher than the 2021-22 US soybean production estimate of 121.5 million tonnes, which is the most soybeans the United States has ever produced. Plus, South America is expecting to benefit from much-improved soybean production in Argentina, which the USDA forecast at 50 million tonnes in March, up from 25 million tonnes in 2022-23. Harris said with the Brazilian soybean harvest nearly complete and with Argentina’s harvest about to start, the window for US soybean exports to secure business from China, the world’s largest importer of soybeans, has closed and may not open again until the 2024 crop is harvested in the United States later this year.

But robust competition from South America isn’t the only factor interfering with US export business. Lingering impacts from the 2018 trade war with China along with looming threats of additional sanctions on the nation continues to affect trade relationships with the leading buyer of US soybeans. In 2022-23, the US soybean export value totaled approximately $32.6 billion. China accounted for more than $18.8 billion, with the next destination trailing at around $3.3 billion. In the 2023-24 marketing year, China has been sourcing most of its soybean imports from Brazil. In January-February Chinese soybean imports from the South American nation were up 211% from a year earlier to 6,960,000 tonnes, while imports from the United States fell 50% to 4,960,000 tonnes.

“Anti-China rhetoric from Congress, the continued threat of tariffs from both the US and China, and the lack of a roadmap for long-term resolution of these challenges combine to increase uncertainty for US farmers and exporters,” Josh Gackle, president of the American Soybean Association, recently testified to the US House of Representatives. “There is substantial risk that more unanticipated tariff action will undermine investments, export prices and farm income.”

With export opportunities struggling to gain a solid foothold, the trade is turning toward domestic demand to pick up the slack. In recent years, the industry has been rapidly growing its soybean crush capacity, with the USDA forecasting 2023-24 US soybean crush at 2,300 million bus, up from 2,212 million bus in 2022-23. The trade is expecting to increase the capacity even further with the addition of 12 new crushing plants and 5 planned expansions by 2026, potentially raising the crush capacity by another 1,462,000 bus per day.

The main driver behind all this crush capacity expansion is the robust demand for soybean oil, especially from the renewable diesel sector as the US Environmental Protection Agency (EPA) continues to mandate biofuel blending targets for refiners or importers of gasoline or diesel fuel. But the current volume requirement from the Renewable Fuel Standard (RFS) mandate expires in 2025, and the recent spotlight on supporting electric vehicle integration and bolstering infrastructure to support the transition away from fuel-based vehicles has stirred concerns. Last year, the EPA proposed implementing a biofuel credit allowance for electric vehicles. The EPA eventually recommended delaying the proposal, but the potential for inclusion in future requirements remains a possibility.

“You’ve got loud voices on both sides as far as what these RFS mandates should look like and what clean energy should look like in general,” Harris explained. “The views vary pretty widely between parties, and it certainly could be an issue in 2025.”

Skeptical about corn drop

The USDA’s forecast in its March 28 Prospective Plantings report that farmers intend to reduce 2024 corn planted area by 4.9% from 2023 was a major surprise to many analysts. The USDA forecast of 90,036,000 acres planted to corn in 2024 was down 4,605,000 acres from 2023 and was 1.2% below the average of analysts’ pre-report expectations that ranged from 90,000,000 to 93,472,000 acres, per a Reuters report.

Arlan Suderman, chief commodities economist, StoneX, agreed that the USDA corn planting forecast was too low. Large decreases in projected corn and soybean area in March tend to see “quite a bit of movement” in the June (Acreage) report, which is survey based.

“I think we could pick up another 1 million to 2 million acres of corn in the June report depending on spring planting weather,” Suderman said.

Although parts of the top corn producing state of Iowa remain dry, soil moisture profiles in most of the rest of the Midwest are in better shape, he noted.

“Once we get past this week (April 7-13), warm, mild and drier weather will promote active planting,” Suderman said. “I expect to see very rapid corn planting that will facilitate higher acres.”

The timing and speed of the onset of a La Niña weather pattern that typically brings warmer, drier conditions to the Midwest in the summer and cooler, wetter conditions in the fall will be important in determining crop yields this year. If the onset is late July and August — past the key July pollination period for corn — the greater impact will be on soybeans, although corn still could be affected, he said.

Another area of concern for corn is that conditions this summer may promote high humidity that tends to keep nighttime temperatures elevated, which was the case in 2010. Corn needs cool nights to maximize yields.

The USDA in its assessment of the April 2 US Drought Monitor showed 24% of US corn production area in some level of drought compared with 29% at the same time last year, and 22% of soybeans in drought areas versus 20% last year. Drought area for corn in Iowa was 71%, with Nebraska and Iowa the next closest, both at 42%. Seventy per cent of soybeans in Iowa were in areas of drought, followed by 51% in Nebraska, 41% in Kansas and 38% in Missouri.

The corn planting intentions number coupled with the USDA’s March 28 Grain Stocks report that pegged corn stocks below trade estimates sent corn futures higher on the day the reports were released. The USDA estimated March 1 US corn stocks at 8,347 million bus, up 13% from a year earlier but about 1% below the average of pre-report trade expectations. The estimate included 5,079 million bus of corn on farms, up 24% from 2023, and 3,268 million bus off farms, down 0.7%. December 2023 to February 2024 indicated use of corn was 3.82 billion bus, up 12% from the same period a year earlier. The USDA in its March supply-and-demand report forecast the carryover of corn on Sept. 2, 2024, at 2,172 million bus, unchanged from February but up 60% from 2023 after record-high corn production last year. The average price of corn paid to farmers in 2023-24 was forecast at $4.75 per bu, down 5¢ from April and down 27% from 2022-23. Analysts in general said lower returns on corn this year likely encouraged fewer acres planted to corn. In contrast, the average price of soybeans paid to farmers this year was forecast at $12.65 per bu, down 11% from 2022-23, and soybeans have lower input costs than does corn.

Suderman said he thinks the USDA’s soybean planted area forecast pretty close, but spring wheat was too high and cotton was too low.

The “big thing” in the report was the loss of 6,290,000 total acres planted to major crops, 3.9 million acres of which was in the Plains states, with the largest drop of 1,268,000 acres in Kansas, followed by 1,198,000 acres in Texas, Suderman said. Such a large decrease in total planted area wasn’t explained by the USDA, and it tends to not be picked up in the June USDA Acreage report, although Suderman said he wouldn’t be surprised to see a large (and unexplained) planted area increase in 2025.

Some suggested the lower planted area was the result of fewer marginal acres planted due to lower commodity prices. The decline comes on the heels of an 8,744,000-acre increase in planted area in 2023, which likely was in response to strong prices.

“I think this was an excessive decrease,” Suderman said. “I can guarantee that we didn’t lose 1.2 million acres to urban sprawl or solar panels in Kansas.”