Grain Spreads: Corn Whopper
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Commentary
Another WASDE report came with another surprise by USDA in the form of corn acres that were revised 1.4 million acres higher. This suggests planted acres coming in at 98.7 million and harvested acres at a whopping 90 million. 7 million harvested acres over last year. Despite the bearish news, corn traded higher and closed 13 cents off the low. Markets that react friendly to bearish inputs is a bullish indicator in my view. The acres increase for now offset yield loss at 186.7, down from 188.8 last month. However, the big bullish input in this report and why corn may have rallied today was that corn exports were revised higher by 100 million bushels to 3 billion bushels, which maybe near a record export program. The massive export number drove down ending stocks 7 million bushels to 2.110 billion bushels. World old crop ending stocks up 1 million metric Tonnes with new crop carryout down around a million. A scratch if you will. USDA raises 2024/25 BRZ crop by 3 MMT, but 2025/26 E.U. output falls by 2.7 MMT. The report can be considered slightly bearish, as the yield estimate came in slightly above expectations, but the harvested acreage increase for the second month in a row was a surprise in my opinion. Dry weather issues and disease pressure were not significant enough to tighten the balance sheet, but yet the market rallied today. The bottom line for corn is that a massive crop is on the way. Storage could be an issue, but very strong demand is expected. In my opinion I still believe the crop will be revised lower by years end down to 183 to 185 bushels per acre. That could revise ending stocks lower by 300 to 500 million bushels. I think yield estimates for beans and corn are too lofty and optimistic. It’s been way too dry in the eastern belt where crop ratings are lower, and it’s forecasted to remain bone dry until month end. Very similar to last year where USDA put corn yields above 183 late Summer, only to be revised back down to 179 once the crop was in the bin. I look for the same type of regression in both beans and corn into year-end if late season drought persists in the East.
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Sean Lusk
Vice President Commercial Hedging Division
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