Chicago Board of Trade Market News
Outlook: “Where did those acres go?” That’s the question traders and analysts around the world are asking after today’s Prospective Plantings report from USDA. The report, which was widely expected to show a decrease in corn acreage and an increase in soybean area, instead showed reductions in both crops. USDA now anticipates 88.026 million acres of corn to be planted this year and 88.982 million soybean acres. If realized, USDA’s latest corn area projection would equate to a reduction of 2.14 million acres from 2017, a decrease of 2.4 percent, and mark the first time since 1985 that soybean acres exceeded corn.
Some of the decrease in corn area is expected to be made up by increases in other crops, including sorghum. USDA expects 5.932 million acres to be planted to sorghum this year, an increase of 306,000 acres from last year. Barely planted area is forecast to fall 195,000 acres to 2.286 million this year.
Assuming trendline yields and a five-year average relationship between planted and harvested acres, 2018 corn production could fall 2.8 percent to 14.193 billion bushels. Similarly, the increase in sorghum area and a return to “normal” abandonment (versus last year’s above-average rate) could increase sorghum production to 409 million bushels, an increase of 12.4 percent from 2017.
The Export Sales report was neutral for corn today. Corn sales for the current marketing year were well above their needed pace. YTD exports account for 41 percent of USDA’s export forecast at the marketing year’s halfway point. Given the South American crop’s trouble, it is possible for U.S. exports to increase going forward.
From a technical perspective, today’s price action in corn futures was a decisive win for bulls. However, the question remains: where to go from here? May corn futures are still a few cents below their intraday high for their 2017 rally while December futures are just a half-cent below their high for the same period. With slow exports and sizeable grain stocks, the U.S. is not yet in a tight-supply scenario. Additionally, planting decisions are not fully finalized yet and farmers could add some corn acres back to the mix. Given these factors, corn futures will likely stay at or slightly above current values, waiting for the crop to be fully planted.