Ahead of the Aug. 12 USDA reports, traders and farmers expected this round of information to provide clarity to the unprecedented 2019 corn and soybean crops. Yet, this year’s August reports, which included more information than ever before, mostly created more questions.
USDA pegs corn production for grain at 13.9 billion bushels. That’s based on a national average corn yield of 169.5 bushels per acre, 82.0 million harvested acres and 90 million planted acres.
Soybean production is forecast at 3.68 billion bushels. That’s based on a national average soybean yield of 48.5 bushels per acre, 75.9 million harvested acres and 76.7 million planted acres.
Traders prior to the report were predicting smaller yields, planted and harvested acres for corn. For soybeans, traders expected smaller yields and larger planted and harvested acres.
Following the release of the reports, corn prices sank by about 25¢ and soybean prices by 11¢. The price reaction was due to several surprises in the report, says Jerry Gulke, president of the Gulke Group.
A big factor in today’s report, Gulke explains, is the addition of the prevent plant (pp) numbers from USDA’s Farm Service Agency (FSA). As of now, the total prevent plant acres for 2019 sits at 19 million acres. Of that, 11.2 million are for corn and 4.3 million are for soybeans. This marks the most pp acres reported since FSA began releasing the report in 2007 and 17.49 million acres more than reported at this time last year.
“They said that it may take until October before they have all the reports in, which is ludicrous to me in this in this electronic day and age,” Gulke says. “But they have said there's something like 11.2 million acres of pp in that 90 million acres number. That would imply, ‘Holy cow, you were going to plant 101 million acres of corn?’ But that's not necessarily the case.”
Prevent plant decisions were based on which crops provide the most money, Gulke notes. Since FSA is still compiling data, the total pp acres are still uncertain.
“So, in a report that was supposed to answer all the questions, it gave us a lot more questions than answers,” he says. “It would be really interesting if things turned to be not as bad as they looked and all of a sudden, we erased that 25¢ movement corn.”
Gulke reminds farmers of a long-held mantra of the markets: It’s often not where the market trades, it is where it closes.
“I think we need more than one day's activity and calculations to see what's going on,” he says. “It may be more about where are we going to close this week, with respect to where we close last Friday. In the meantime, somewhere in the middle lies truth, I guess.”