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Acreage Increases Send Prices Tumbling

Mike Silver
Mike Silver

There were plenty of surprises in the USDA planted and grain stocks reports released on Monday. The big surprise came in the soybean planted acre number. The USDA projects that at a record high 84.8 million acres, up 11 percent from last year. Mike Silver, with Kokomo Grain, said the figures were well above what the market had expected, “The range of guesses going into the report was 80.5 to 83.2,  so the report was well above anything the market had expected.” The increase in acreage planted compared to 2013 is led by the soybean “powerhouse states” of Illinois, Iowa, Nebraska, and Minnesota which are each expected to plant between 600,000 to 850,000 more acres this year. 

Corn acreage was pegged at 91.6 million acres, down 4 percent from last year. This represents the lowest planted acreage in the United States since 2010; however, this is the fifth largest corn acreage in the history. The corn number was close to what traders had been expecting, averaging 91.7. The March intentions report had pegged corn acreage at 91.69 million acres. 

Silver told HAT the stocks number was also a surprise to the market, “The corn stocks number of 3.845 billion bushels well above the pre-report expectation of 3.724, so it was higher than the market expected.” As a result, new crop corn prices put in a new low on Monday, and Silver says they may go even lower, “The funds are still long the corn market and, if based on this report, they begin to unwind those long positions, we could see this price continue to move lower.” Silver expressed some skepticism over where the USDA found the high stock number and hoped the market would find a summer low where it could begin to build some support heading into harvest.

Logan Burges, at Grain Hedge.com, on the HAT mid-day podcast, said soybean prices may also see much lower prices, “The USDA is forecasting a new crop on farm price in the $10 range; and, given the number we saw today, it is hard to argue with that assessment.” This month’s report reinforces forecasts that the soybean market is in transition, said Todd Davis, crops economist at AFBF. “The old-crop soybean market is managing tight stocks through higher prices while the market is waiting for a potential record-large new crop harvest,” he stated.

On June 1, 2014, Indiana corn stocks totaled 309.3 million bushels, 94 percent higher than a year earlier, according to Greg Matli, State Statistician of the USDA, NASS, Indiana Field Office. About 45 percent of the corn was stored on farms. The third quarter disappearance was 229.0 million bushels, compared with 154.3 million bushels a year earlier. Soybean stocks on June 1, 2014, were 32.4 million bushels. That was 1 percent higher than stocks a year earlier. The third quarter indicated disappearance was 40.0 million bushels, compared with 39.5 million bushels during the same period in 2013. Farm stocks of soybeans were 10.5 million bushels. Wheat stocks on June 1, 2014, were 15.4 million bushels, 37 percent below a year ago. Approximately 98 percent of wheat stocks were in commercial storage. Fourth quarter indicated disappearance was 9.1 million bushels, 16.1 percent of supply.

More analysis from Mike Silver can be found here.

More analysis from Logan Burges can be found here.