Next Thursday is one of the big USDA reports that the agricultural community gets psyched up for: planted acres and quarterly stocks. With ending stocks still historically tight, the information released on this report will likely set the price tone for the rest of summer.
Traditionally the price reaction on this report day can be dramatic; potentially leaving prices nearly limit up or limit down depending on the information received.
This year, with the delayed spring planting it will be interesting to see how the USDA pegs planted acres for corn. Currently the U.S. planted acres for corn are pegged at 89.5 million acres, with harvested acres at 81.7 million acres (approximately 91.3% of the planted acre number). Yield has already been adjusted lower to 177 bpa.
Three scenarios to consider
Let’s look at three different acre scenarios, assuming no change to yield, beginning stocks, or demand. This is important because ultimately traders will focus on perception of the ending stocks. If the perception is that ending stocks are getting larger, then prices tend to drop lower, and vice versa.
- Should corn planted acres come in slightly lower at 89 million acres, then ending stocks would be down to 1.321 versus the current 2022-23 estimate of 1.4 billion bushels.
- If planted acres come in slightly larger at 90.5 million acres, then ending stocks would be pegged at 1.565, and would then likely keep corn futures trading each and every weather forecasts throughout July to get a better handle on yield.
- Should planted acres come in at 91 million acres, then ending stocks would swell to 1.648 billion bushels, comfortably larger than 1.4 billion bushels estimated now.
Quarterly stocks showstopper
The showstopper on next week’s report might be the Quarterly Stocks number. For the past three years, the June 30 Quarterly Stocks number has trended lower than the previous year.
On last year’s June 30 report, the U.S. corn stocks as of June 1 came in just over 4 billion bushels, down from 5 billion bushels the prior year. As of this writing, I have not yet seen any pre-report estimates for next week’s report, however I can’t help but wonder if that number might yet again be smaller this year due to strong demand.
After recently talking with clients about old crop bushels on hand, most have very recently “sold out” taking advantage of near $8 cash corn prices or have less than 5% of their total production on hand.
With basis still so strong throughout the Midwest, it also makes me wonder what grain elevators or ethanol plants have on hand for corn in storage. If they had bushels available wouldn’t the basis levels be wider?
If quarterly stocks come in smaller than expected, that means on future USDA WASDE monthly reports, that the 2021-22 ending stocks number would need to be reduced, which then affects carry-in for the 2022-23 crop year, ultimately pointing to a still historic tight ending stock situation that is not improving. Prices would then likely trade in a volatile manner reflecting the most recent weather forecasts throughout summer months.
The June 30 report is coming up quick next week on Thursday, with the market headed into a three-day holiday weekend after that. Expect high volatility, potential dramatic price swings, and plenty of chatter about weather forecasts and crop conditions that will keep this market hopping.
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