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Corn Market Still Whirling from Reports

July 2, 2011
By: Sara Schafer, Farm Journal Media Business and Crops Editor

The numbers released by USDA yesterday have raised a lot of eyebrows. Here’s what they mean for farmers.

 
USDA rocked the markets yesterday by projecting U.S. farmers have planted 92.3 million corn acres this year. This year’s projected corn acreage is 5% more than last year and the second highest planted acreage since 1944, behind only 2007’s 93.5 million acres.
 
The increase in corn acres equaled a decrease in soybean acres. U.S. soybean growers planted 2.2 million fewer acres than last year. A total of 75.2 million acres have been planted to soybeans in 2011, the lowest since 2007.
 
With the recent weather severities that produced major planting delays and complications, the market raised its eyebrows at the data. (See all of AgWeb's June report data and analysis.)
 
So, what does this data really mean for farmers? 
 
“The farmer has the best pulse on what is really happening in the field,” says Allendale’s Bill Biedermann. “They know that if the USDA missed those facts, farmers are going to hold sales.”
 
Biedermann says if farmers hold off on making cash sales in the next few weeks, he expects USDA will make revisions to yesterday’s numbers.
 

How Much Longer Will Corn Prices Tank?

With the unexpected increase in acreage, many market analysts have predicted corn prices to come under significant pressure. As of Friday, July Corn closed around $6.40, September Corn at just over $6 and December Corn at just under $6.
 
Biedermann says the movement in the markets is largely due to speculative money.
 
Once that gets done, he says, the industry will come in and really determine what’s really happening with supply and demand. “We’ll see some bounces, for sure.”
 
Biedermann says analysts are guessing corn prices could drop down to $5.50 to $5.75.
 

Good News for Livestock

The decline in corn prices was a welcome sight to livestock producers, who had been getting squeezed by the recent high grain prices.
 
“This is actually a healthier environment for agriculture,” Biedermann says. “If we would have gone to $9 or $10 corn like some people we saying, we would have hurt livestock for years.”
 
He says having this pullback could sustain a nice healthy profit for both the livestock and grain producers. “We can survive with both sides making money.”
 
 

For More Information

Listen to Biedermann's complete analysis on AgWeb Radio.

See all of AgWeb's June report data and analysis.


 

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COMMENTS (7 Comments)

iowafarm2 - PA
Vilsack is the head of the USDA. Fire him for stupidity or laziness or both. He is spending time drawing plates of food for nutritionists instead of making sure that the NASS reports jibe w FSA and WASDE. The buck stops with him.
FSA is most accurate because they make farmers certify is return for DCP payments. Use their numbers and fire NASS beancounters because they are idiots that give a present to China and a lump of coal to farmers.
3:10 PM Jul 4th
 
NAGEL
with less than 2,500.000 bushels in deliverable positions indicates that commercials are short corn. now might be a good time for farmers with corn to call their hand. many hav e been buying hand to mouth waiting for this big break. well you can buy paper in chicago, but you will have to go to the country yo buy corn. if futures go higher than cash, no matter how high, then we would have a buyers market for those that are long the mrket. with such a strong basis it is a sellers market only if you are short the board.
7:23 AM Jul 4th
 
NAGEL
with less than 2,500.000 bushels in deliverable positions indicates that commercials are short corn. now might be a good time for farmers with corn to call their hand. many hav e been buying hand to mouth waiting for this big break. well you can buy paper in chicago, but you will have to go to the country yo buy corn. if futures go higher than cash, no matter how high, then we would have a buyers market for those that are long the mrket. with such a strong basis it is a sellers market only if you are short the board.
7:23 AM Jul 4th
 
WCMN Farmer - MN
MBJ and FG: I couldn't agree more with your observations. Here in my area where corn is usually silking by now most is just barely knee high. The best corn we have is waist high. Yesterday we talked with our broker who wondered if a class action suit could be brought against the USDA for their ineptness. Years ago an old fellow said "if you can't work for anyone else-work for the government because they can't fire you".

A lot of financial damage has been done and it will take along time for this to all shake out. In the end....many sleepless nights. I have to remind myself I am not alone on this island. We as farmers have been circle by the sharks. Where is it written that farmers can't make money? The days of the hayseed farmer are over. This will have a trickle down effect. We make less money we spend less money. Everyone from the implement dealer to the main street stores will feel the sting of inaccuracy. I wonder where in the end will this all shake out or if it just gets shuffled under the rug.
10:32 AM Jul 3rd
 
FG - cuba, IL
I remember the 1993 flood year when USDA refused to recognize the reality of crop loss depressing prices until AFTER the harvest was in.

The markets reacted to false data and many farmers lost a bundle.

In 1993 were they incompetent or was in part of conspracy to depress prices? It was one or the other!

While USDA was willing to give billions to Blakcs for alledged discrimination in loans, they are shall we say, a little less likely to make up for false reports. And no one will be held accountable either.

For 2011, we shall see. But the damage to corn markets has been doen for many farmers who do not store corn for a year at a time.
1:33 PM Jul 2nd
 
FG - cuba, IL
I remember the 1993 flood year when USDA refused to recognize the reality of crop loss depressing prices until AFTER the harvest was in.

The markets reacted to false data and many farmers lost a bundle.

In 1993 were they incompetent or was in part of conspracy to depress prices? It was one or the other!

While USDA was willing to give billions to Blakcs for alledged discrimination in loans, they are shall we say, a little less likely to make up for false reports. And no one will be held accountable either.

For 2011, we shall see. But the damage to corn markets has been doen for many farmers who do not store corn for a year at a time.
1:33 PM Jul 2nd
 
MBJ - North Platte, NE
There was a time when I thought that the USDA actually did a good job in their sampling. This was brought into question last October when they miscalculated the old crop corn inventory as farmers were blending new crop corn with their damaged old crop. Now they miss again as they come up with planted acres that either are under water, or were still planted well past reasonable planing dates for insurance reasons. The acres may be right, but the yields are grossly over estimated. Harvested acres will not approach the acres estimated. This will changes yields significantly, even if the early corn does well. Their credibility going forward is seriously in question.


11:57 AM Jul 2nd
 



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