The much anticipated June acreage report was released Thursday by USDA and there was a significant surprise. Their estimate of 94.1 million acres of planted corn this year was well above the average of trade estimates, and the corn market reacted with a strong sell off. Soybean acres came in less than the average of guesses, and both corn and soybean stocks on hand were higher than expected.
Arlan Suderman, Chief Commodities Economist with INTL FCStone explained what it all boils down to.
“When you look at the data that came in from USDA it basically said the safety net got much larger for corn. It takes a bigger yield hit now to start tightening up the balance sheet. When you look at soybeans we see that the safety net got smaller. Yes, stocks are bigger than the trade expected, only about 10 million more than what I had down for my estimate, and when you look at the current export pace I think we’ll utilize much of that before we harvest this year. Without the acreage there we may struggle to meet demand next year if we have any weather problems at all.”
Suderman says the market is now all about weather, although the June reports will continue to play a role.
“This report becomes the filter through which traders interpret those weather forecasts, and so with more acreage and bigger stocks meaning less feed demand as well, it takes a more intense weather event to be bullish corn. With fewer acres and strong demand for soybeans, which USDA will likely be raising our demand estimates on July 12th, it means it takes less of a weather event to start getting the trade excited.