Okay, maybe I age myself. Gomer Pyle was a comic character from The Andy Griffith Show in the ’60s. His character was spun off into a show, Gomer Pyle, U.S.M.C.
He was known for two sayings, including, “Go-ol-ol-ly!” and “surprise, surprise!” It was the “surprise, surprise” that I was thinking of as I read the U.S. Department of Agriculture reports this week.
The market has long awaited the annual March 31 (unless that comes on a weekend) prospective plantings report and the March 1 grain stocks report — that is, the report of the grain stocks on hand the first of March, released March 31.
Not as expected
Before the report, we saw a lot of speculation about what would be in the report. Based on my start, you will understand that both corn and soybeans were expected to show certain acreages and certain grain stock volumes.
In fact, the reports confounded the experts, and prices reacted strongly. The acreage survey was based on actual farmer surveys, so it tends to have more impact than the usual report based on USDA analysis.
The average trade guess for corn acres was an expected planting this spring of 92 million acres. In fact, the report says we will only plant 89.49 million acres. That is a huge difference.
Speculation now is that farmers did not get as many inputs prepaid as usual, as they waited for lower prices. The lower prices never came, so now some farmers are fading their corn acres toward cheaper-to-plant soybeans.
Along with the smaller acres came corn stocks slightly lower than the expected 7.85 billion bushels. Both of these encouraged higher prices, and, in fact, we got higher prices, especially in the new crop, which is to be expected.
May corn futures were actually 19 cents lower for the week, but December futures closed to new highs at $6.88, up 19 cents. That means the old crop-new crop spread tightened by 38 cents, a big deal.
Contributing to higher prices is the idea that Ukraine will have limited corn exported this year because of the war. That supply ends up coming from us, directly or indirectly. That is, the corn may come from us, or it may displace some other corn that will then be replaced by us.
Soybean surprise
The soybean market was on the other side of the surprise Gomer Pyle market. There, we saw prospective acres 2.2 million above the trade expectations. USDA is predicting 90.955 million, which is also 3.76 million acres more than we planted last year.
Also, the grain stocks came in slightly higher than expected, adding to the effect of the acres alone. The more-than-predictable result was a month in which we lost 26 cents on March soybean futures, and lost 15 cents on November futures.
The weekly results were worse. We actually took May soybean futures down $1.271⁄2, and November down 90 cents.
Geopolitical picture
In the big geopolitical picture, we had three reasons for commodity prices to fall. First, China is in love with lockdowns right now, and that causes us to see them as using less oil.
Then, we were teased by some “negotiations” between Russia and Ukraine. I put that in quotation marks because they in reality have little to talk about. Russia is in the middle of raping, robbing and murdering Ukrainians into mass graves, in some cases with their hands bound and with evidence of torture.
With this evidence on every Western television screen, Ukraine is not likely to say, “That’s all right — we can all get along.”
Then, there was the strategic oil reserve release, which sounds like a big deal but is so small compared to our usage. Then, there is the fact that the government is planning to buy back the oil at lower prices.
If we in fact see lower prices, and we did get crude below $100 a barrel briefly, the government is pledged to buy oil, causing the price to go back up.
So, now we have political reasons for unease in grain prices, and we have fundamental issues, also.
Unknowns sill ahead of us this year include spring planting weather, not currently seen as a pleasant surprise, early growing weather and consistent talk in the Western Corn Belt of dry soils.
What that means is, take this as a selling opportunity for some of your grain, but don’t bet the farm that the rally is over. Pray for a good crop, but keep on hoeing.
