End of the Week Comments and Tom's Take, July 02, 2020

July Soybeans close up 1

September corn futures lost 7 today, ending at $3.43 1/2, but that is up 24 1/4 this week. December corn also lost 7 today, ending at $3.53 1/2, but gaining 28 1/4 week-on-week.

August soybeans were down 1/4 today, closing at $8.91 1/4, and gaining 31 1/4 from last Friday. November beans lost 2 1/4 to finish the week at $8.96 3/4, gaining more than 35 for the week.

This week’s big story is definitely the USDA’s acreage report that was released Tuesday and the action on the Board of Trade since. Analysts had anticipated a reduction in corn acres, expecting 2 million less than the March intentions report. We did get a reduction, but it was instead 5 million less corn acres. Soybean acres gained about 300,000 acres, instead of an increase of close to 1 million as expected. All wheat acres decreased 500,000. There was an interesting chart put together using the USDA’s state by state info for the March acres on all of the principal crops grown in the US and comparing it to the June acres report. All these acres totaled just over 319 million acres in March and now total less than 312 million. So, somewhere, we’ve lost more than 7 million acres across the U.S. According to the USDA, these were simply not planted. A look at the state by state info shows North Dakota did not plant 1.4 million acres; Texas lost 1.1 million; Nebraska was down 700,000; South Dakota lost 600,000; Illinois 500,000; Minnesota lost 450,000; Missouri was off 400,000. Even Iowa lost 140,000 acres.

That continued the rally in corn, beans and wheat that started Monday on changes to the weather forecasts and added about 10 cents to corn prices. At one point on Tuesday, September corn was up 17, and closed more than 12 higher; and then they added another 9 cents on Wednesday before today’s price action. Many of the managed money funds started the week in a very short position, and they have been offsetting or covering these shorts all week. This has also added some fuel to the fire.

For more items impacting the prices of corn and soybeans, please tune into our free “Bull Bear Banter” podcast: https://landuscooperativeexperience.podbean.com/.

Tom’s Take:

This week really threw a curveball to traders in Chicago. Regardless of how we got there, it was good to see the markets rally this week. It is curious to note how many acres were not planted this year. As mentioned above, seeing more than 7 million acres go unplanted this year is hard to understand. Especially when compared to last year, when we “lost” fewer acres from the March report to the June report, with major flooding last year. 

If you are in Iowa where EVERYTHING seemed to go great this year, it’s probably even harder to justify. We had a lot of reports of people getting done with all of their planting in April, which is mostly unheard of. I guess the lesson is one we’ve all been taught before - don’t just look at the fields in your backyard, there is more going on across the country. 

Weather markets come on quickly and can disappear just as quickly. 

Another thought I have bouncing around inside my head is the same one I usually have on the Independence Day break. In years gone by, many of the traders worked on the floor of the Board of Trade and were pretty much confined to Chicago for much of the spring and early summer. But come July 4th, they left Chicago, and for the most part, drove back to their Dad’s or their Grandpa’s farm, and really had a chance to see first-hand how the crop looked to them on their drive. They probably got out and walked in a few fields, and then compared that first-hand knowledge to every other year in their experience. A lot of times, that day after the 4th of July holiday, we’d see a pretty good correction. My theory was that what they had been reading and hearing didn’t match up with what they saw when they got outside of Chicago. Things have changed, and they aren’t necessarily at the Board of Trade anymore, but they are generally in an office in the Chicago area. I wonder, along with the COVID situation if they will go to their “home” farms this weekend. Regardless, I bet they find time to walk in a field or two somewhere. It’ll be interesting to see Monday’s trade – will their eyes have told them something different than what they thought they understood? Or will it confirm what they are already thinking? Stay tuned, it’s going to be interesting, especially with another MAJOR USDA report out next Friday and pollination starting soon. Will it stay hot and dry? Or back off a bit? 

We had a little setback today, we’ll see what next week brings. I hope you took advantage of the rally and either finished up old crop sales and/or made some new crop sales. I know there were several I talked to that expressed using this “gift” to price some new crop. I think that’s wise. 

Tom.Guinan@LandusCooperative.com

Have a GREAT holiday weekend