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Opinion: Resetting U.S. corn expectations after USDA’s acreage shocker

It would appear corn acreage actually is far higher than anyone expected

Reuters | Chicago – For the second time in less than two months, overly aggressive market expectations for the U.S. corn crop tanked Chicago corn futures August 12, when the U.S. Department of Agriculture published its latest round of reports.

Analysts did not think it was possible for U.S. farmers to have planted as many acres as were reported, as excessive spring rains led to the most delayed corn-planting season perhaps ever. But data has been increasingly supportive of a higher corn acreage than everybody thought.

If market participants do not reframe their approach to this year’s unique U.S. growing season and at least remain open to the possibility of larger production, all subsequent USDA reports are likely to be super bearish and will continue to suppress corn futures.

USDA’s National Agricultural Statistics Service found an unusually large number of unplanted acres during its standard June survey, prompting the agency to resurvey 14 major producing states during July.

The results from the resurvey, along with satellite imagery and acreage data from the Farm Service Agency (FSA), informed the new corn-planted-area number of 90 million acres. Market analysts had been expecting plantings at 88 million with a high-end guess of 89.8 million.

Corn acres harvested for grain, which are more important to production than the actual planted area, came in at 82 million acres, also slightly above the high end of the trade range.

It is also important to recognize that a steep drop in soybean acres made room for more corn acres. NASS projects 2019 soybean plantings at 76.7 million acres, down 12.5 million on the year and the smallest bean acreage since 2011. That number was drastically lower than the trade average guess of 81 million acres and below the lowest estimate of 78 million.

Combined 2019 corn and soybean plantings at 166.7 million acres are down 6.5 per cent from last year’s 178.3 million. That figure is also down five million acres from June 2019 and down 10.7 million from the March 2019 peg.

Despite the hardships of this year’s planting seasons, countless farmers have reported that the second round of U.S. government trade aid, which was partially revealed for the first time in May, incentivized them to plant in sometimes less-than-ideal conditions as the payments did not originally intend to cover unplanted acres.

While there is a chance that fewer corn acres and/or lower yields are eventually realized, being overly set on that outcome and ignoring any evidence to the contrary will probably create more destruction in the futures market in the coming weeks and months.

About the author

Columnist/Reuters

Karen Braun is a Reuters market analyst based in Chicago. The views in this column are her own.

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