It had to come to an end.
After a spectacular runup in June, corn took a big hit on the last day of the month, with prices limit down (30 cents US) in most contract months on the Chicago Board of Trade.
The June 30 U.S. Department of Agriculture report delivered the blow, as it estimated a planted corn area of 87.3 million acres, the second highest total since 1946.
“The corn number was bearish and the June 1 stocks number was bearish,” said a Minnesota based broker, referring to U.S. corn stocks of 4.03 billion bushels, up 14 percent from June 1, 2007. Corn also gained 1.3 million acres since the March USDA acreage survey.
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Corn futures for the nearby month dropped below $7.25 per bushel June 30, after opening at $7.54 per bu. for the week.
The USDA acreage report was also bearish on wheat, with an estimate of 63.5 million planted acres for all U.S. wheat, up five percent from 2007.
Numbers for soybeans were more neutral with the planted area estimated at 74.5 million acres, almost unchanged from the March USDA estimates of 74.8 million acres.
“The trade was expecting 74.2 million acres and they got 74.55,” said Dan Manternach, of Doane Advisory Services in St. Louis, Missouri.
The corn numbers rocked the grain trade, which has been riding a bull market on the back of heavy June rain that flooded fields and towns across the U.S. Midwest.
The impact of that flooding remains murky, however, because more data must be collected to determine the extent of crop damage.
The USDA normally collects acreage data in early June for its end of month report, but this year it had to reinterview 1,200 farmers in Iowa, Illinois and other midwestern states in late June, to incorporate the flood damage into its estimates.
Based on the second interviews, the USDA lowered its estimates of the percentage of corn that will be harvested to 90.4 percent from 92.4 percent. That change means that U.S. farmers should harvest 78.9 million acres of corn, which would still be the second largest harvest since 1944. The largest harvest was last year, when U.S. farmers took off 86.5 million acres of corn.
Even with the reinterviews, analysts are skeptical of the USDA’s adjusted numbers.
“There’s still not a good grasp of what the flooding in June has inflicted,” said Mike Jubinville, an analyst with Pro Farmer Canada in Winnipeg. “So, what we see in terms of numbers today just doesn’t answer the question for us.”
Added Manternach: “Obviously the USDA isn’t confident they totally got it right, because they will resurvey about 9,000 farmers in mid-July” and report on those findings in August.
That question mark, along with unanswered questions about corn and soybean yield in the flooded areas, should continue to prop up prices, Manternach said.
“It’s the combination of the unknown. How many of those acres will just go abandoned?”
Misgivings aside, he believes the USDA got the numbers right in its acreage report. He expects that the July survey will simply confirm the June figures for acreage.
“It will come in very close to what they put out today (June 30).”
