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Corn bearish, soybeans bullish

By Doug Tenney, Leist Mercantile

Shock and awe with acres numbers today. Corn bearish, soybeans bullish. USDA did it again, it’s called a surprise!

At a time when traders, producers, and end users are starving for information on acres and yield, today’s acres report falls far short. There is a vast amount of irony today due to what many have expected and what the numbers should reveal but likely won’t.

The corn acres were 91.7 million acres while soybean acres were 80 million acres. Shortly after the report corn was down 11 cents, soybeans were up 12 cents.

Shortly before the report, corn was up 2 cents, soybeans up 4 cents, wheat up 1 cent. The average corn acres estimate was 86.7 million acres with a range of 82 to 89.8 million acres. The average trade estimate for soybean acres was 84.4 million acres with a range of 81 to 86.5 million acres.

The most attention today will focus primarily with corn. For weeks since mid-May there has intense focus on the lack of corn planting progress. Print and digital media have bombarded producers with literally a cascade of articles detailing prevent planting payment calculations and the author’s recommendations. USDA stopped collecting farmers’ surveys of acres planted and or their intentions to plant before many had made final decisions to not plant corn and soybeans. Those decisions to not plant were made June 10 and after.

While Ohio leads the Midwest with the lack of planting progress on June 24 for corn and soybeans among the top eight U.S. states for corn and soybean production, don’t pin your hopes and 2019 gross revenues on this fact leading the market higher. Closer examination for 2018 US corn production reveals Ohio was 8th in corn production with 617 million bushels. Total U.S. corn production in 2018 was 14.4 billion bushels with Ohio producing 4.2% of the nation’s corn. Ranking the top 10 states in 2018 US corn production would be — Iowa, Illinois, Nebraska, Minnesota, Indiana, South Dakota, Ohio, Wisconsin, and Missouri.

Without question the corn and soybean rally since mid-May has been solely a supply driven rally. Corn has pulled corn and soybeans along for the ride. Supply driven rallies are extremely volatile and difficult to navigate. A bull needs to be fed every day. The same can be said for a bull market.

The weather with numerous weeks of rains and lack of sunshine resulted in week after week of planting delays. As the delays mounted the number of acres of corn not planted grew as well. Trader estimates were all over the spectrum as they pegged corn prevented planted acres anywhere from 4.5 million acres to as 12 million acres. It is still a moving target. It will likely be the Aug. 12 report when more is known on actual U.S. corn and soybean acres.

The market drifted lower for weeks this spring.  The U.S./China trade talks which so many producers had pinned their hopes for a better 2019, collapsed when an agreement nor its signing date never materialized. The addition of a bearish March grain stocks report led some to believe U.S. corn production in 2018 may be have been larger than first reported. In addition,  monthly WASDE (supply and demand) reports this spring had less corn being fed to livestock. This number was inconsistent compared to past years. The news cycle was dominated with negative news. Within days, the start of a spring rally never imagined by producers was in its infancy.

Weather will be a key factor in July. Hot and dry is typically bullish. Cool and wet is typically associated with the adage “rain makes grain.” More grain is bearish for prices. However, this summer cool and wet is likely to not be bearish most of the time.

In case you have not come to this conclusion, put a few more notches in your seat belt. Buckle up.

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