By Kirk Maltais
--Corn for December delivery rose 4.7% to $3.50 1/2 a bushel on the Chicago Board of Trade Tuesday, with traders reacting to a lower-than-expected acreage projection for 2020.
--Soybeans for November delivery rose 2.4% to $8.82 1/4 a bushel.
--Wheat for September delivery rose 1.1% to $4.91 3/4 a bushel.
HIGHLIGHTS
Bullish Surprise: The USDA's acreage report showed lower-than-expected acreage figures for corn and soybeans planted by U.S. farmers. 92 million acres of corn and 83.8 million acres of soybeans were planted as of June 1 according to the USDA versus projections of 95.2 million acres and 84.8 million acres, respectively, by analysts surveyed by The Wall Street Journal. "Shockingly low corn and bean acres likely reduces some of the downside risk," said Doug Bergman of RCM Alternatives.
Production Cut: Implied corn production is likely down by as much as 1 billion bushels based on the USDA's data, said Terry Reilly of Futures International. "Implied 2020 US corn production suggests its down 1 billion bushels from the June WASDE after USDA lowered the planted area by 5.0 million acres from March Intentions," said Mr. Reilly. "Some producers may have decided you can't make as much money in some of these commodities than previous years." The USDA previously projected 2020 corn production at nearly 16 billion bushels - so a decline in production has traders believing the corn supply situation will be tighter than previously expected.
INSIGHTS
Sluggish Indicators: The USDA's quarterly stocks report appears to show demand for U.S. grains has been hit by coronavirus and tensions between the U.S. and China. The USDA projected Tuesday that corn stockpiles totaled 5.2 billion bushels as of June 1, while soybeans totaled 1.4 billion bushels and wheat totaled 1 billion bushels. All three of these projections are higher than what analysts surveyed by The Wall Street Journal expected. Although grain futures are right now reacting to bullish acreage figures, the lower projections for demand may become a bearish pull on futures later this week.
Livestock Hiccup: The onset of coronavirus in the U.S. is likely the reason for the higher inventories reported by the USDA Tuesday, especially when it comes to the consumption of grain feed by livestock. "Bigger corn stocks suggest that the livestock supply disruptions resulted in lower feed usage than the trade expected, more than offsetting quality issues remaining from the 2019 harvest," said Arlan Suderman of StoneX.
Bears Still Growling: Even with the bullish news corn received via the acreage figures, it remains to be seen how long corn futures will be lifted on the strength of the report. "The report was a bullish corn shocker, but we doubt that U.S. farmers were able to enter all those acres in Prevent Plant," says AgResource. "Our longer-term view stays bearish, but less so than before the report on the decline in U.S. corn/soybean seeding."
AHEAD:
--The EIA releases its weekly update on ethanol production and inventories at 10:30 a.m. ET Wednesday.
--The USDA releases its monthly grain crushings report at 3 p.m. ET Wednesday.
--The USDA will release its latest weekly export sales numbers at 8:30 a.m. ET Thursday.
-- The Chicago Board of Trade is closed in observance of Independence Day on Friday. The exchange will reopen on Monday.
