Prices of maize and soy have been under pressure since this week. The decline is an advance that traders are taking on the publication of the acreage forecasts that the United States Department of Agriculture (USDA) is making public tonight Dutch time (Wednesday, March 31). That indicates a lot of uncertainty in the market. Speculators are especially vulnerable. Many have entered a rising market with the expectation that it would continue to rise.
The stock and area forecast that the USDA presents at the end of March is known to set the market in motion. This year, analysts expect larger areas of soy and corn due to the relatively high prices at the moment. The market is anxiously waiting to see how large the USDA estimates the expansion. The question then arises whether there is sufficient demand for this increased production.
Not always right
Of the last 15 forecasts made annually at the end of March, 5 clearly had a price-boosting effect on both soy and corn. The last time this was the case in 2018. During that 15-year period, the area expectations were only within 2015% of the actual sown area in 2016 and 0,5. If the figures tonight turn out to be lower than most analysts expect, prices could recover. Futures market contracts for the coming harvest in particular can benefit from this.
According to previous expectations, American soy stocks are historically low in the coming months. A disappointing soy area will result in a price increase. However, there is a major uncertainty: the Chinese demand for soy. There are increasing doubts in the market about how effectively African swine fever is being combated there. A slower recovery of the Chinese pig sector means less demand for soy, making smaller acreage less problematic.
Warm weather benefits corn
The warm weather forecast for the American Corn Belt is in favor of corn. If sowing maize can be started early, this often leads to additional hectares being sown. Often at the expense of soy. This effect is not included in the USDA expectations.