USDA Acreage Report – June 30, 2020

Write this down, USDA finally threw us a bone!! It was this report last year that really turn the tide of the market lower. We can celebrate our gift here but we do not need to stop marketing our crops. USDA dropped corn acres a huge almost 5 million acres from March intentions and 3 million below expectations. Many had expected a big drop in corn (and cotton) to push significantly more acres over to beans but that did not happen. Wheat came in near expectations and cotton was quite a bit below. Stocks on corn was a bit negative but offset for today by the acreage. Wheat and bean stocks were neutral.

This acreage shift on top of some drying trends and heat in the weather models has started spooking the funds who are buying back positions. We have a gift here and we need to be selling into it! I am not saying you have to sell your entire crop tomorrow, but we need to be selling this rally in corn now at $3.50 Dec and selling beans around $8.75 to $9. I think we can be a little more patient on beans. This report does not change the fact that we are projecting record stocks, it will just be a little less of a record. This report does not fix the issues with ethanol demand or tensions with China. There are a lot of farmers who have old crop and new crop orders working that will keep a lid on rallies. The market is going to turn near complete focus onto weather now. With the long weekend coming up, if the models trend hotter and drier there may be some more upside. We need to have reasonable targets!!

If you have nothing sold for new crop you need to start now at $3.50. We need to be between 25% and 50% in the next few weeks. We need to be scaling in more sales to get above that in the next few weeks. Reasonable upside targets are $3.63 or so but it is going to take some massive shift in demand or weather or both to push above that. It is marginal acres that have been taken out of production so a huge drop in acres may actually help yield. TAKE ADVANTAGE OF THIS GIFT, SCALE IN SALES!!

Depending on your risk tolerance, get orders working close to $9.00 on soybeans. We have better fundamentals, but more risk with China. Chinese congress passed more laws aimed at Hong Kong that the rest of the world had warned them not to. We will see what happens with that.

Wheat did not get much help. It does not have much upside from here without strength in the other grains. Weather looks pretty benign and stocks are comfortable. Acreage was at a 100+year low but that was expected and demand has been shrinking. Be making plans for your wheat. There is 0.60-0.70+ carry in just the wheat basis to hold it until winter. There are lines now at the flour mills but once it’s put away it’s hard to pull out.

Cotton got a boost but until we get above where the LDP is, there is no incentive to do anything. Weather has not been helpful for the acres that were planted so if we can get some traction economically, cotton could see some strength.