Front month corn futures have settled limit bid on the first two quarterly reports this year, January 12^th and March 31^st. Given the importance of the data we will receive next Wednesday June 30^th, another limit move should not surprise.

The USDA is currently operating with the tightest new crop balance sheets for corn and soybeans that we have seen in nearly a decade. Implied usage based on the difference between March 1 stocks and June 1 stocks will be used to update old-crop balance sheets in July’s WASDE report July 12^th.

While July corn trading $1.00 over Sep, and $1.15 over Dec, certainly implies old crop stocks are indeed very tight, USDA has a habit of waiting until the September stocks report to come clean on just how tight. By that time, new crop will be on deck, and it might not matter if things were tighter than we thought.

While the stocks portion of the report will immediately add or subtract bushels from old crop supply, the acreage numbers have the potential to make a big splash heading into 4^th of July weekend. Using USDA’s trend-line yield of 179.5 bpa, and their assumption that 91.7% of corn acres planted will be harvested, every million acres equates to 165 million bushels of production. While it is difficult to think we will raise a trend-line yield, which is roughly 3 bushels per acre above the current 176.5 bpa record national yield, we must also realize that USDA is not likely to adjust yield until the August WASDE report August 12^th.

What the trade expects

Most industry professionals are looking for additional corn acres next week with an average estimate of 93.8 million acres and high / low of 95.8 and 92 million acres, respectively. The swing in terms of production between the high and low acreage estimates equates to 627 million bushels; that alone is over half the current assumed old crop carry-in of 1.1 billion bushels. Remember, even the low acreage estimate is 900,000 acres more than USDA’s current number of 91.1 million acres, or 148.5 million bushels worth of additional production.

Let’s create a few potential outcomes from this report, keeping USDA’s current 1.362 bb new crop corn carryout number in mind:

Weather watch

Weather during the month of July then becomes paramount. Even the most bearish acreage number might not be bearish for long if trade feels as though yield won’t reach trend. When we think about where the extra corn acres came from in the first place, trend-line yield seems, at the very least, questionable.

Last year’s 172.27 bpa yield on 95.8 million acres would bring that potential 2.136bb carryout right back down to 1.501 mb, a measly 140 mb above USDA’s current number. Last year’s 172.27 bpa yield on 92 million acres drops carryout to 900 mb.

This isn’t so easy, is it?

Don’t even get me started on the possibility that USDA’s harvested percentage could be a half or full percentage point too high. Recent flooding in Missouri would lend credence to that thought process. Drop the harvested percentage to last year’s 90.7% on that big 95.8-million-acre number with last year’s 172.27 bpa yield and we’re right back to 1.336 bb.

Can you imagine the swings in futures values if the market goes from thinking carryout could be above 2 bb, just to find out a month later that it’s back below 1.4 bb?

I haven’t even addressed new crop demand, which we feel could be understated if China continues to require corn imports into 2023. But, USDA is unlikely to adjust export demand higher until it slaps them in the face; look how long it took the USDA to acknowledge China’s current buying spree.

If this blog read bearish at the beginning, and then slowly turned bullish again towards the end, well that was by design. It looks as though the market over the next several weeks could evolve in much the same fashion, a bearish gut check with a slow turn toward realizing things aren’t as bearish as they appeared. How will your marketing plan accommodate the potential short-term bearishness on bushels you might need to have marketed this fall? What if we did plant a huge number of acres and July weather is accommodating?

The possibilities are nearly endless and you’re not going to figure it out before the market does. Risk management wins again.

As always, feel free to contact me directly at 815-665-0463 or anyone on the AgMarket.Net team at 844-4AGMRKT. We’re here to help.

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