The feature story in the grain markets this week was the USDA’s release of the highly anticipated June acreage and quarterly stocks data. As usual with the June report, the figures surprised trade, resulting in increased volatility across the ag sector.

Corn acreage came in at the low end of pre-report estimates and over 1 million below the average trade estimate at 92.7 million. Soybean acreage came in at 87.6 million, below the low end of estimates and 1.35 million under the average trade estimate. Wheat acres were reported at 46.7 million, 800,000 higher than trade expected. Incorporating the smaller than expected figures into the balance sheets and the possibility of below trend yields, it could be argued that more risk premium is warranted in the current market. Reinforcing the need for favorable weather in the coming weeks.

While the corn and soybean acreage estimates came in under expectations, the total was still above the March planting intentions report. The largest increase in acreage came from Minnesota, North Dakota, and South Dakota. Three states that are struggling with drought conditions and high percentages of acres in the poor-to-very poor crop rating category. The largest soybean acreage increases were in North Dakota, Iowa, and Missouri.

Elevated prices and near ideal planting conditions this spring have many arguing that the updated acreage figures are highly questionable. However, there is an old adage in trade that states; “The path to the poorhouse is paved by traders who didn’t believe government reports”. Which basically says, regardless of the perceived validity of the figures, trade will trade the numbers given by the USDA, period.

The quarterly stocks data released also added to the bullish tone. June 1st corn stocks were reported 32 million below the average trade estimate at 4.112 billion bushels. The total was a large 891 million bushels under last year’s figure. June 1st soybean stocks came in 20 million bushels under the average trade guess at 767 million bushels. A large 614 million bushel decline from a year ago. Wheat stocks were 184 million less than last June at 844 million bushels.

With this report in the books, weather and crop conditions will again be the main drivers in price discovery. Global conditions have turned quite variable in recent weeks. The southern and eastern Corn Belt have battled excessive rainfall, resulting in floods. While the northern Plains and northwest Corn Belt continue to battle drought and extreme heat. Brazil’s safrinha belt caught headlines recently as freezing temperatures were said to have added to that crops decline.

The latest NOAA drought monitor showed improvements for many areas that were suffering from abnormally dry and drought conditions. A frontal boundary brought heavy rains across much of the central U.S. bringing large-scale improvements for those regions. Northern and western areas unfortunately missed the rain events and experienced record-breaking heat, resulting in further deterioration of conditions. It is estimated that as of June 29th, 38 percent of the U.S. corn crop and 33 percent of the U.S. soybean crop is in some degree of drought. A slight improvement from the prior week.

Reports state that Minnesota is 75 percent short to very short of topsoil moisture, as June 27th. That is considerably less than the required topsoil moisture for normal plant development. While rain would still be beneficial to developing crops, irreversible damage has undoubtedly taken place to both corn and soybean crops.

For more information, you may contact Mick Hoover at (515)-200-5115, or e-mail at mhoover@maxyieldgrain.com. The opinions and views expressed in this commentary are solely those of Mick Hoover. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position. Please visit our Risk Disclosure Page for more information on commodity trading.