Grain Spreads: Surprises and Realities

Sean Lusk General Commentary Leave a Comment

Another bearish whopper given by the USDA as all the kings horses and all the kings men couldn’t knock down the corn acreage number again. Despite the fact the FSA (farm service agency, division of the USDA) revealed in a separate report today that prevent plant acres of corn totaled a record 11.2 million acres. Corn finished limit down. Click on their link below to view their findings and if possible vs last the last three years. Data for each crop year since 2007 is given.

Corn acres at 90 million vs avg guess at 87.5 . Yield at 169.5 vs 164.9 avg trade guess. The most bearish of estimates by the USDA along with production at 13.9 billion vs 13.1, an 800 million bushel increase that increased ending stocks to an estimated 2.181 billion bushels vs an average trade guess at 1.57 billion. The acreage number set the tone today and makes no sense given that the USDA is saying we planted the same amount of corn acres essentially as the year prior. Per FSA data, in 2018 there were 929 K reported prevent plant corn acres. In 2019 there are 11.2 million prevent plant corn acres. Somethings amiss here. Yield and ending stocks data are always subjective due to the weather so I can accept the figures given. There will be some adjustments coming to say the least. Until then play the charts. Today’s limit down move isn’t encouraging and the market could take some more heat, potentially taking Dec corn down to 375 and then 367. A close over 4.08 is needed to turn the market higher in my view.

Beans were quite the opposite where the numbers were considered bullish vs report day expectations. Yet because corn went limit down and wheat lost over 5 percent, sellers emerged after Nov beans traded over 890 post report. The planting numbers for beans seemed to be more in line with FSA data. USDA pushed soybean acres down farther than analysts expected, meantime. The agency’s assessment for August was for 76.7 million planted acres and 75.9 million harvested acres. Compare that to analyst estimates of 80.947 million planted acres and 79.890 million harvested acres. Per-acre yield potential is somewhat of a different story. USDA held steady its projection of 48.5 BPA from a month ago, while analysts expected, on average, a decline to 47.4 BPA. Still, with fewer harvested acres, USDA is estimating a total production of 3.680 billion bushels, down from the agency’s estimate of 3.845 billion bushels in July. Analysts had expected a more modest drop, to 3.786 billion bushels. Nov beans settled at support at 878-880. A close lower takes them to 860 and then 848 in my view. Resistance is at 8.93, 9.05 and then 921. I will post charts tomorrow and assess the wheat market.

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