Markets unPACKed: Prospective Planting is Over — So Now What?
Prospective Planting is Over — So Now What?
Last week the grain markets were consumed with the annual Prospective Planting report published on March 31.
Quick recap on planting numbers: both corn and beans planting projections fell well below analyst expectations. The expectation for corn acreage was 93.2 million acres, and the USDA reported 91.14 million acres to be planted. In beans, expectations were 89.99 million acres, and the USDA reported 87.6 million acres to be planted. It was mainly these numbers that led the markets to trade limit up with May contract up 70 cents to 1436’6 and corn May contract up 25 cents to 564’2 on Wednesday, March 31.
On Thursday we saw corn dip slightly, down 4 cents but soybeans fell 34’6 cents back down to 1402.
While this weekly insight is generated with OTC in mind, we wanted to discuss Pack Creek’s thoughts on what to expect for the coming months.
We often like to look to past years. We started our analysis knowledge around the price action of both 2011 and 2012 Prospective Planting reports. In both years, corn planting increased significantly, with corn up 5% in 2011 from 2010, and in 2012, Reuters reported that corn planting was at its highest in 75 years. In fact, in 2012, analyst expectations were lower at 95.7 million acres, and USDA reported 95.64 million bushels to be planted. It was soybeans that fell in planting projections, with 2011 down 1% from 2010 and 2012 planting amounting to 73.9 million acres and analyst expectations at 76.7 million acres. (Data from CME group).
With that said, 2021 resembled similar responses to the reports. In 2011, May corn futures traded 30 cents higher, then opened another 42 cents higher off the report. In 2012, May corn futures traded 40 cents higher on the report. For soybeans, 2011 May soybean futures rallied 38 cents, and in 2012 they rallied 47 cents.
So, now what? With beans coming back 35 cents the following day and further technical analysis from our traders, we are now focusing on 2012 as our analog year to compare price action.
After the report, the trade went sideways:
Figure 1. (source: Barchart.com)
Figure 1 shows December 2012 corn futures trading sideways after the report until June, when the famous draught started to hit the futures market. In figure 2 below, we have November 2012 bean futures showing a rangebound trade within 90 cents. Soybeans were slightly more active and interesting during planting, but still unremarkable. We expect April and May of 2021 to trade sideways unless a significant weather disruption occurs.
Figure 2. (source: Barchart.com)
What might this mean for OTC trading? Current structures run less risk of knocking up or doubling up, though it is still possible. It may be best to watch this week’s trading with clear accumulation levels in mind you would like your OTC provider to offer before reacting to a quieter market.
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