Grain report - bullish!

The U.S. Department of agriculture today released the long awaited report about U.S. farmers' planting intentions for the 2011/12 crop season.

The total acreage came in slightly higher than expected at 239.4 mio acres, which is 9.4 mio acres more than the 2010/11 season.

The biggest winner, compared with expectations, was wheat and corn while the losers were soybeans and cotton (see table below). The corn acreage will be the second largest since 1944 as strong demand for food and ethanol has reduced world stockpiles. It has outpaced  increases for wheat and soybeans as farmers can make more profit per unit of corn compared with the other crops.

The USDA also released first quarter stock levels where both corn and soybeans levels were lower than expected, while wheat was higher.

Despite almost meeting expectations and considering the current tightness in especially corn and soybeans, this report looks bullish for the whole sector as dwindling stock levels means weather developments over the coming months will be absolutely crucial in order to achieve status quo.

The global market will struggle to absorb weather related shocks like the ones we saw in 2010 - in particular the Russian drought and flooding elsewhere.