2019 will be like no other – I hope. Where we thought the June acreage report would give us answers, it has left more questions. I have a feeling there will be fireworks in the corn market well past July 4th.
I must accept the NASS acreage data published Friday as the best data to date, it will be the benchmark for balance sheets until new acreage data is available on August 12. This is not “Fake News”, it is data collected from farmers, processed exactly like all other June Acreage Reports. Some may be looking for the “Hanging Chad”, it’s not here. Until then, the market will focus on weather and factor in corn acreage that is higher than we expected prior to Friday.
Let’s talk about the process for the acreage data. NASS employs two surveys, list and area.
List: about 68,000 respondents
Area: about 9000 segments.
(Not stated in report: based on weekly crop progress, Corn was 83% planted, soy 60% planted on 6/9)
August 12 WASDE: Will include the new acreage estimates using the resurvey data, and preliminary FSA data.
Adding up the acres:
Corn and soy acres account for the majority of the changes in total acres YOY and the differences between the June Acreage and the March Intentions. We will focus just on corn and soy.
Corn: mil acres
Either the intentions didn’t catch all the switch to corn or sometime between March 28th and the first of June the farmer decided to plant more corn. Maybe a combination, but I lean toward a change in plans with corn prices at $4.50 and soy at $9 (2.0 ratio) at the end of May. Areas within a state that could plant corn in May likely moved toward more corn. It is difficult to pick this up from state data, because most states will have some prevent plant that accounts for the lack of significant change from the Intentions Report. The dry areas within a state planted more corn, the wet areas have PP. The theory also supports our idea published in May, that PP would force the market to bid for acres, and the role of the market in late May and early June was to do everything it could to keep the farmer planting corn.
The soy acres are straight forward. I believe there were few PP soybean acres designated during the survey and 80 – 81 million acres were the potential acres. My current PP soy estimate is 1.5 mil, taking current planted to 79 million. US end stocks drop to around 700 mil bu with yield at 49. World end stocks drop about 8MMT to 105.
Given 80 million for soy, late May intentions for corn would have been 95 million. At the time of survey, I estimated PP corn at 3 mil, takes planted or intended to 91.7. Further corn PP estimated at 4 mil, current planted at 88 million acres. 88 planted, 80.5 harvested at 165 bpa is 13.2 billion bushels – end stocks near 1.5 billion. Our panic threshold of 12.7 bil bu is now at 158 bpa. The additional acreage created by Friday’s report equals 6 bu/ac. of added weather buffer. I believe the acreage not harvested for grain will remain at 7.5 million acres with the provision to harvest forage from PP acres eliminating the need to harvest more corn than normal for forage.
As far as markets: We are back to weather that looks to be positive for the Midwest crop in the first half of July. Corn is likely to be choppy, but sliding lower without a weather surprise, put the range prior to Aug 12th at $4.10 to $4.50 basis Dec. Soy has some support, but much of the rally has been on the heels of corn. Without corn support Nov soybeans trade $8.75 - $9.25 into Aug. Chicago wheat may be the weakest with Sep potentially heading to $4.80, more in line with corn, Matif wheat, and KC wheat. Funds are too long corn and Chicago wheat.
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