Sow in May

Okay, okay, so it’s a corny headline, but we’re pretty darned sure you’ll forgive us! 

When farmers all get the same kernel of an idea in their heads, it can spell disaster. That’s what happened Tuesday when the Chicago corn contracts spent the whole day limit down after a report showed that farmers more than made up for delays to planting caused by rain when they got busy in May.

The Department of Agriculture surveyed 87,000 farmers during the first two weeks of June to find that they all had the same great idea of choosing corn as their main crop. That means that we can expect the second largest corn crop ever since 1947. The 87 million acres of corn planted is 2.4% higher than the crop forecast released in March and could increase production 1.2% over last year’s crop. 

The larger potential crop sent corn futures to a 30-cent per bushel loss to $3.6725 Tuesday, with traders left to speculate whether the crop will be as big or whether the rains will depress the numbers. 

A separate report showed the current crop overhang is also likely to be larger at 4.266 billion bushels, up about 6% on last year. This also adds to supply woes for the market and likely stems from reduced demand for livestock feed. Lean meat prices earlier this year as pork prices tumbled made it unprofitable for farmers to fatten livestock and instead sent young cattle directly to the slaughterhouse. 

Speculators were caught on the hop by Tuesday’s report primarily due to the incessant reporting of bad weather making planting conditions difficult for farmers and so the increased acreage planted was a shocker to traders. Just one year ago corn futures traded within an inch of $8.00 per bushel meaning that since then prices have more than halved.  

Soybean prices too eased, but didn’t feel the same impact as corn, which is the largest of the American crops by value. Beans reached their lowest price in three months at $9.4350. American farmers haven’t had it so good thanks to strong Chinese demand and a simultaneous slump in South American harvest due to drought-like conditions. Farmers surveyed said they had planted 2.3% more acreage with soybeans at 77 million acres than last year and up a million acres from the March estimate. 

Wheat hit its lowest point in more than six months at $4.9575 and closed at $5.1175 per bushel after the report showed 13.77 million acres were planted with spring wheat, higher than the 13 million acres forecast. The fact that inventories at 677 million bushels are twice the level of a year ago managed to rub salt in the wound.

Higher market prices and favorable Midwest conditions provoked farmers to boost plantings across all crops and the already ample starting supplies simply make this a buyers market for now.  

The one thing that made out okay on the session was cotton. It too suffered from increased plantings but when the data was put under the microscope, it appears that the increase came in areas where lower yields can be expected, which had the impact of offsetting the shocker of a report.

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