US corn and soybean planting data disappointed last week, coming in well below analyst estimates. That was the latest spark in a string of supply-side catalysts set to ignite agricultural commodity futures. From corn to coffee, prices of raw goods have been pumping up food inflation.
Due to growing droughts, biodiesel demand, and China’s ongoing bout with hog-borne illness, that trend looks likely to continue throughout the year. As a result, MRP will be adding LONG Agricultural Commodities to our list of Active Themes.
Related ETF: Invesco DB Agriculture Fund (DBA)
In an even worse turn for crop supplies, the USDA’s Prospective Plantings Report, released last week, showed corn and soy plantings significantly below analyst expectations of 93.2 million and 90 million acres, respectively.
Corn plantings were recorded at 91.1 million acres and soy plantings covered 87.6 million acres. Though each of those figures represents multi-year highs, analysts expected already tight inventories and favorable pricing to incentivize the strongest planting season ever.
As of March 1st, corn stocks were 7.701 billion bushels, down 3% YoY, and a six-year low. The indicated disappearance for December 2020 through February 2021 was 3.59 billion bushels, compared to 3.38 billion during the same period a year ago. Wheat stocks were also at a six-year low, totaling just 1.314 billion bushels, 7% less than last year.
Soybeans came out at 1.564 billion bushels, a drop of 31% YoY, marking the tightest supply in five years. The indicated disappearance during the second quarter of the 2020/21 marketing year was 1.38 billion bushels, up 39% from the second quarter of 2019/20.
As the Star Tribune writes, smaller-than-expected plantings of the two main cash crops in the United States would heighten concerns about global food and animal-feed supplies after importers and domestic processors loaded up on grain and oilseeds earlier this year. The United States is the world’s biggest corn exporter and the number two soybean supplier.
Several external factors like weather, biodiesel demand, and China’s ongoing bout with hog-borne illness are expected to have an impact on global crop supplies throughout the year….