After suffering from a supply glut that has dragged on grain prices, U.S farmers plan to plant less corn and soybeans this year, bolstering soft agricultural commodities and related exchange traded funds.
On Thursday, the Teucrium Soybean Fund (NYSEArca: SOYB) jumped 2.0% and Teucrium Corn Fund (NYSEArca: CORN) surged 3.2%.
Meanwhile, CBOT corn futures increased 3.0% to $3.8475 per bushel and CBOT soybean futures gained 2.3% to $10.41 per bushel on Thursday.
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According to the U.S. Department of Agriculture, soybeans will cover 89 million acres in 2018 and corn will be planted on 88 million acres, which each came in well below the lowest prediction of many analysts, Bloomberg reports. This is also the first time soybean acres planted have exceeded corn acreage in the past 35 years.
“Obviously it’s a big shock to the market,” Jack Scoville, analyst at The Price Futures Group, told Reuters.
In contrast, farmers planted 90.2 million acres of corn and 90.1 million acres of soybeans in 2017.
Ongoing Supply Glut
Back-to-back years of bumper crop harvests have led to an oversupply of grain crops, fueling a multi-year rout in prices and dragging farmer incomes lower. The USDA calculated that corn inventories were at 8.89 billion bushels and soybeans at 2.11 billion bushels, both records for the March 1 date and above average analyst forecasts. The government also recently revealed that farmer profits will dip to their lowest this year since 2006.
Commodity traders have also been anxious amidst trade war talks as China is said to be looking into the potential impact of trade restrictions. Chinese news outlets have criticized alleged dumping of U.S. production, but no single commodity has yet to be targeted. China is a large importer of U.S. soybean as the grain feeds an expanding hog herd and pork consumption.
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