Fewer Corn Acres Planted, Futures Prices Advance | Blog
Teucrium | June 30, 2020
The USDA released estimates for corn planted acres at 92 million well below the average analyst guest of 95.1 million acres according to data compiled by Bloomberg. The revision suggests that US farmers will harvest some 500 million bushels less than previously estimated.
Professional corn futures traders had been shorting corn betting on a record harvest and lower prices (to go short a trader sells corn contracts hoping to buy the contracts back at a lower price in the future). Today’s report however has shifted the narrative and it is likely that traders began buying back contracts limiting potential losses as corn futures prices advanced.
Weather will be the critical factor moving forward. The vast majority of the US corn crop pollinates over the next 30 days. Unfavorable weather has to potential to damage the crop and limit yields. A reduction in yields would further reduce total corn production estimates and would likely provide additional supportive for prices.
To be certain, as long as the weather cooperates, we believe that there will still be a surplus of corn for the 2020-2021 crop year; just a lot less than previously estimated.