Corn Is King Says USDA – US-FOREX.US
A bearish report from the U.S. Department of Agriculture buried crop prices on Tuesday as the market absorbed higher-than-anticipated planting acreage for corn and soybeans. Wet weather didn’t appear to negatively impact corn planting as much as the market had expected. The USDA’s 2009 forecast of 87.0 million acres puts the new crop at the second-largest planting since 1947. Although downpours significantly delayed the planting period, the arrival of drier weather in May allowed farmers to play catch-up. Corn for December delivery lost the maximum amount during Tuesday’s trading session, dropping 30 cents, or 7.6%, to 3.67 a bushel in early-afternoon trading. Soybeans were another sore spot, with the November contract down by 22.8 cents, or 2.3%, at 9.61 a bushel during Tuesday’s afternoon trading session after the USDA forecast a record planted area for the oilseed with 76.5 million acres. Expectations for a bigger harvest could mean lower commodity prices, which could ease margins of ethanol plants, food companies and meat producers. Trading was mixed among ethanol producers, with Green Plains Renewable Energy
and Pacific Ethanol
up by 3.1% and 9.7%, at 6.26 and 40 cents, respectively; while BioFuel Energy
was down by 0.8% at 63 cents. Meat producers traded broadly lower with the exception of Smithfield Foods
, which was up by 3 cents, or 0.2%, at 13.84. Hormel Foods
and Tyson Foods
were down by 0.9% and 2.3%, respectively, and Conagra Foods shed 48 cents, or 2.5%, to 18.97 during Tuesday’s afternoon trading session.
Investors had anticipated a significant reduction to corn crop acreage resulting from soggy weather as farmers swapped corn fields to soybeans, which can be planted later and require less fertilizer. In March, the USDA estimated 2009 U.S. corn plantings at 85 acres and soybean plantings at 76.02 million acres. Industry estimates were for a rough 1-2 million-acre move from corn to soybeans.DTN senior analyst Darin Newsom, however, doesn’t consider the new crop acreage to be a complete surprise since December to March future spreads leading up to the report suggested a more bearish view than anecdotal chatter indicated. According to Newsom, USDA soybean stock totals at 597 million bushels are much more surprising as ending stocks are estimated at 110 million bushels. He doesn’t see soybean demand as robust enough to burn through 487 million bushels in the near-term.”At some point, the USDA is going to have to revise something to get those numbers more in line,” Newsom said.