Crop markets watching Iran war implications

By RHIANNON BRANCH
FarmWeek

March world agricultural supply and demand estimates (WASDE) reports from USDA are traditionally quiet in terms of changes to balance sheets and market reaction, and this year was no different. With few notable changes in the report, crop markets remain focused on the war in Iran and potential market implications from the conflict.

Dale Durchholz, market analyst with Grain Cycles, said corn and soybean markets are taking cues from the crude oil market, which has been on a roller coaster since the war began, surging for a week and then falling ahead of the report March 10.

“Maybe the biggest thing we can talk about in all this is what’s happened in the energy market and the Strait of Hormuz,” Durchholz told FarmWeek. “With shipping curtailed somewhat, it’s really going to be this uncertainty about what the corn, soybean acreage mix is going to be for the coming planting season because we get a lot of fertilizer through that area too.”

In the WASDE report, USDA left the domestic corn balance sheet unchanged. For soybeans, a slight upward revision was made to imports and crushings. On the wheat table, the season average farm price was bumped 5 cents to $4.95 per bushel.

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Durchholz said the most notable takeaway from the report was a change in South American production estimates.

“The biggest change I found of anything was they lowered the Argentine corn crop by a million tons, and they lowered the Argentine bean crop by half a million tons,” he said. The department also boosted Brazil’s corn crop estimate by 1 million metric tons (mmt) to 132 mmt.

Aside from watching geopolitical factors and spring weather, traders are also anticipating USDA’s quarterly grain stocks and prospective plantings reports, scheduled for release March 31.

“We’re sitting here with USDA looking for a 3.5-to-4- million-acre switch from corn into soybeans. With what has evolved now in the energy sector in terms of fertilizer availability, if anything, I think we’ll probably move that gauge a little bit further. I think we could lose 5 million acres of corn and gain 5 million acres of beans,” Durchholz said.

With a wet start to March, he said the potential for early planting like last season could also pull acres away from corn.

“And the profitability of planting corn versus beans continues to say don’t plant corn, it’s just too high of a cost crop,” he said. “That’ll get magnified by the events of the last couple of weeks now, too.”

Durchholz expects the farm economy to have a negative impact on total acres as well.

“We could see, compared to last year, losing probably 2.5 million, maybe even as much as 3.5 million of total acres, especially if weather stays a little unruly,” Durchholz said.