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July 01, 2020 | FBN Insights | Kevin McNew

Markets Move Higher After Surprising Acreage Report

USDA reduced the planted corn acreage estimate by 5 million acres

USDA Acreage Report Comments 

  • USDA reduced the planted corn acreage estimate by 5 million acres from the March intentions to 92 million acres.
  • This was the largest March-to-June decrease since a 9.5 million reduction in 1983 and was below the lowest pre-report projection. 
  • The survey reported 83.8 million bean acres, which surprisingly was only 315,000 acres above March planting intentions.
  • USDA forecast other spring wheat area at 12.2 million acres which was at the low end of trade ideas and compared with 12.6 million intended.
  • Cotton planted area was also projected lower than expected at 12.2 million acres. 

FBN’s Take On What It Means: It certainly appears that lower prices and uncertainty around the coronavirus outbreak worked to discourage planting. It would not be too surprising if some of the 6.6 million acres lost from last year (especially in soybeans) are found in future reports, but significant changes are not expected. With these reports out of the way, weather over the next 30 days becomes critical as it determines whether further short covering takes place.

USDA June 1 Quarterly Stocks

  • USDA surprised the market with June 1 corn stocks at 5,224 million bushels, well above the 4,960 million average pre-report estimate.
  • March-May Corn disappearance of 2,733 million bushels implies feed,seed, and residual use of 816 million bushels, the smallest since 2011.
  • Soybean stocks were slightly smaller than expected at 1,386 million bushels compared with the average trade estimate of 1,392 million.
  • This is still the second largest June 1 soybean stocks on record, 396 million bushels smaller than last year.
  • Wheat stocks, which represent the old crop wheat carryover, were 1,044 million bushels; about 65 million above the average estimate, implying that feed and residual use was lighter than USDA and the market expected.

FBN’s Take On What It Means : Although the new crop balance sheet remains well supplied, uncertainty around weather and the near record fund short will limit the downside until there is better assurance over yields. 

The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)


 

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