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2013 Bi-Weekly Market Briefings

USDA ACREAGE REPORT KILLS THE BULL

Expectations for the June 28h Acreage Report were for corn acreage to be down at least 2 million acres. However, the USDA surveys disagreed and actually showed a 100,000-acre increase. This pulled all support out of the corn market, leaving it searching for a new low. While the response of producers out there is “I don’t believe that,” the market does. There is all kinds of speculation as to why the acreage is so high:

1. The March Perspective Plantings did not reflect producers’ true intentions, or

2. The June Acreage Report is overlooking flooded parts of fields that will not be harvested.

In any case, the numbers are what they are for now. July will be critical for the US corn crop. While the crop was planted late, many of the major growing areas have experienced near-optimal growing conditions. If weather remains favorable and USDA reports continue to show 67 percent or more of the crop in good to excellent condition, expect the USDA to start raising the yield in the August report. If this occurs without a change in area, expect new crop corn to head toward $4.50. Barring some catastrophic weather event, highs for this market have likely been set. While the weather may change tomorrow, the forecast at this time does not look favorable to this.

While corn acreage fell well short of expectations, soybean acreage was closer to expectations as 600,000 acres were added, compared to 1 million acres expected by the market. Given the large corn acreage and weather over the last few weeks, there was enough skepticism about this number that the USDA plans to resurvey producers for soybean acreage. When you look at soybeans beyond the production, one has to consider the export forecast for this crop. Large supplies in South America will threaten our ability to export our crop. Typically in the fall, stocks are beginning to draw down in Brazil and Argentina. However, a record harvest in Brazil and near record in Argentina leaves those markets with near-record stocks and poised to compete with the U.S. for market share this fall.

Here in Arkansas the acreage report had a few surprises. Probably the biggest surprise is that corn acres remained at 1 million acres, despite weather that we thought slowed harvest and lowered acreage to between 750,000 and 800,000 acres. Cotton acres were up some 50,000 acres, while rice came in at just over a million acres. Rice remains a big wild card for this year as we wait to see what the weather will be when the crop starts heading. This time last year about 14 percent of the crop was heading compared to none this year. Another concern is that only 54 percent of our crop is rated good to excellent. As with all of our markets, we will have to wait and see what Mother Nature has in store for the rest of the year.

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