A combination of continued crop damage along with tighter stocks and fewer planted acres sent the corn and soybean market into a bull market rally on Tuesday. After starting the day stronger, corn and soybean prices moved sharply higher after the release of the USDA Stocks and Planted Acreage reports at Noon Indiana time. USDA pegged June 1 corn stocks at 4.447 billion bushels in its quarterly stocks report, down from trade expectations of 4.555 billion. Arlan Suderman, Senior Market Analyst with Waterstreet Solutions, says the data suggests that higher hog numbers more than offset lower poultry numbers over the past quarter, “The data suggests that higher hog numbers more than offset lower poultry numbers over the past quarter, with implications for feed usage in both the current and next marketing year.”
The soybean ending stocks number was also bullish, at 625 million bushels according to Suderman, “The data provides even more evidence arguing for the agency to significantly reduce the size of the 2014 crop, likely this fall when the trade is focused on harvesting the 2015 crop. It also suggests that the old-crop soybean surplus stocks will likely drop well below 300 million bushels. We won’t run out of soybeans, but it has a significant psychological impact on fund managers growing accustomed to seeing numbers in the 400s.”
As for acreage estimates, the agency pegged corn acres at 88.897 million, falling short of trade expectations of 89.292 million acres. “The smaller stocks and acreage numbers provided an added boost to buying enthusiasm,” said Suderman. “December corn surged to its highest level since January 13.” The soybean planted acreage number at 85.139 million acres was slightly under the market expectations at 85.332 million acres.
Jim Riley, with Riley Trading, says the market is likely to rally for the next several days, “I see December corn reaching the $4.40 area and $11.00 soybeans are definitely in our future.”
“The market’s reaction to USDA’s stocks and acreage reports must be put into context with Monday afternoon’s declining crop ratings,” said Suderman. “Fund managers were still tending to be bearish on Monday, but the combination of the crop ratings and the Tuesday stocks and acreage made them very nervous holding short (sold) positions. I still feel that a pullback is likely in July, because fund managers tend to become skeptical of wet years hurting production, particularly as we now see forecast models start to shift the wettest weather south out of the bulk of the Midwest. However, today’s action suggests that there are still some trapped short positions looking for a break to buy, but be ready to act quickly.”