The USDA reported that U.S. farmers planted 87.9 million acres of corn, up 2% from last year but well below the average trade estimate of 89.229 million acres. Using 170 bushels per acre average yield gives us a crop 226 million bushels smaller than traders figured. The Stocks were also smaller than expected, coming in at 4.31 billion bushels, 288 million smaller than the average trade guess.
When you add the smaller stocks to the smaller acreage total, corn supplies are down over 500 million bushels. That is a very big difference from what traders had in their minds when corn closed yesterday. Corn is worth more and will be sharply higher today. We also have a bigger demand base (smaller stocks means bigger usage) or the USDA will eventually be forced to reduce last year’s production number. These numbers increase the need to grow a big crop this year.
Grain users will look at the corn numbers and step up their buying. Their worry is what if the weather turns hot and dry? You would not like to have the job of grain procurement with little coverage on the books, these tightened numbers and a fresh weather scare in the market. Everybody will want more coverage. Do remember one problem for corn is we have too much wheat.
Livestock feeders need to buy their corn needs through August now!
The USDA reported U.S. soybean acreage at 78.9 million acres up 2% from last year and about 700,000 acres larger than the average trade estimate. Soybean stocks totaled 571 million bushels, some 20 million smaller than traders expected. The reports will give us positive trade because traders were really afraid of bigger acres in my opinion. Besides notice the bean chart, the bean price never really broke down the green line 20-day moving average even though the CBOT had an across the board sell off.
Beans have held stronger at every turn all year long and that tells you they really have underlying strength. The owners of cash soybeans want more money and the market will have to go up to get supplies. In addition, we must raise a big bean crop this year and right now the bean crop is a little worrisome.
What can I tell you about wheat? More acres than we thought, stocks bigger than traders expected (up 48% from last year) and we are in the midst of harvest. Prices should be setting the lows of the new price plateau. Even though there is nothing very positive, it surely can’t get much worse.
The U.S. Dollar index continues to trade in a narrow range. Traders are increasingly worried about a “double dip” economy as witnessed by the sharply lower equity markets yesterday.
On Friday’s Commitment of Traders Report we saw that the big specs bought a net total of 86,412 grain and soy complex futures and option contracts for the week ended Tuesday a week ago. Then during the following 5 trading days the trends turned down and those same specs were (we will find out Friday the exact numbers) were heavy sellers.
Today they will likely be back buying as markets become more positive.
Today’s much awaited
USDA Acreage and Stocks Reports were bullish for corn, positive for beans, and negative for wheat.
