As the cattle market continues to watch what is going on in corn markets, a major report was released on Friday. The annual USDA acreage report was released on Friday and showed a significantly smaller decrease in the number of corn acres in the U.S. than many were expecting it to show. This led to a wild day of trading in corn futures on Friday and left corn futures prices sharply lower by the closing bell.
The report estimated 91.7 million acres of corn planted in the U.S. This was lower than the March Planting Intentions estimate of 92.8 million acres but significantly higher than the average pre-report expectation of about 87 million acres by various trade groups. A higher acreage estimate translates to a higher production total – although yield concerns are another big piece of the puzzle.
As a reaction, corn futures dropped the full 25 cent limit at one point on Friday for the September contract before closing 21 cents lower than the day prior. There was a 40 cent range between the daily high and low. August feeder cattle futures nearly touched $140 for the first time since June 11th before closing just below $137 per cwt.
A lot of money was made and lost on Friday by speculators – and there is already plenty of “I don’t believe those estimates” being tossed around. Many headlines are suggesting that the report is not accurate, there wasn’t enough information, or even that the report should not have been released at all this year. The mad finger should not be pointed at USDA-NASS. They followed the same process as they do every year and everyone knew the report would reflect information collected a few weeks ago.
The report is based on farmer surveys that asked about June 1st planting intentions. Usually, farmers’ intentions on June 1st are very close to what they will actually plant for the year. The historically slow delays in 2019 mean that at least some farmers were unable to execute their June 1st intentions. Because USDA knows this is an unusual year, the report also included an announcement that USDA will resurvey 14 states about planting acreage and release those results on August 12.
What occurred in the futures market on Friday was telling about the level of uncertainty in this market. While many will say that the actual planted acreage will be lower than the estimates released on Friday (and it likely will be), the reality is that the group of people voicing their opinion as a whole using their real money (traders), believed the value of corn in the future would be lower after this report than before. So the report was clearly not ignored. The focus now shifts to yield as the growing season progresses. Lower yields can lead to the same impact as lower acreage totals.