Shurley: 2018 Acreage Report Sends Mixed Signals for Prices
After a run to over 90 cents, prices (December futures) have since fallen on hard times. Relatively, 85 cents is still good, but that’s little consolation to growers that missed some of the 90+ action.
Escalating trade tensions led to the fall from over 90 cents. Prices initially found support around 85 cents, but that support is now being tested. Recent rainfall over parts of the Texas High Plains area are contributing to further weakening of prices. The next level of support should be at 80 to 81 cents, should the retreat take us that far.
USDA’s Acreage report was released on June 29. For most of the week prior to the report, prices hovered around 85 cents. On June 28, prices took a pre-report dive to around 83½ cents, but recovered a little bit of that the next day.
Overall, I would view the report as a neutral factor at this point. If anything, the report should be a positive, but it sends mixed signals. Here’s a quick summary and comments:
- Acres planted is estimated at 13.52 million acres – 7.2% more than last year.
- Acres actually planted are only 49,000 acres higher than what growers said they intended to plant back in March. The big run-up in price came too late to influence most planting decisions.
- Actual acres were expected to be more than intentions. But if you take out the 100,000 acres higher in Texas, the sum of acres in all other states is actually less than the March number.
- Actual acres planted are LESS than earlier intentions in six states.
- Comparing this year to last year, if you exclude Texas, “non-Texas acres” this year are only about 400,000 acres (but still about 7%) higher than last year.
That actual acres planted are above March intentions is no surprise. In fact, 13.52 is on the light side of what most observers thought acres planted would be. This should offer a little help for the recent skid in prices. The addition of 100,000 acres above intentions and the recent rainfall in Texas may ease concerns temporarily about the Texas crop, however. This is still a weather-driven market as far as the U.S. crop is concerned. As of July 1, 36% of the Texas crop was in poor to very poor condition.
USDA’s monthly supply and demand numbers come out on July 12. This will include the first U.S. crop estimate based on the recent acreage number. The market will also be looking at World use and China and India production.