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Did USDA run the bulls out of the corn trade?

A fairly large corn acreage guess combined with a higher stocks number could knock the stuffing out of the corn trade, but ought to lend support to soybeans, one analyst says.

USDA on Tuesday said total '09 corn acreage will total just over 87 million acres. That's on top of a total stocks number as of June 1 of 4.27 billion bushels, a 6% bump from a year ago. Both numbers signal a good-sized ending stocks number for corn this year, when it's all said and done. That could mean the bulls are getting herded out of the corn trade.

"There's no doubt about it: Corn has lost its bullish flavor here quickly primarily because when you take that acres number and put on a good-to-excellent yield over historical average, you come up with a production over 12.6 billion bushels, so carryover moves up to 1.4 billion bushels," says Don Roose of U.S. Commodities in West Des Moines, Iowa. "So, that's adequate supply. but, we still have to get a crop here and put it in the bin."

He does add that because there are still many acres out there where the crop was planted in far from ideal conditions, and, in some cases, acres that farmers are still working to get planted, these numbers may not exactly pan out. "The government is putting a good-to-excellent rating on the crop that's planted. that could be tainted," Roose adds.

On the other hand, soybean stocks are seen 12% lower than they were a year ago. Alone a bullish number, farmers are also going to plant the largest soybean crop in history, more than 77.5 million acres, USDA says. Those acres, coming largely at the expense of wheat and cotton acres in the Plains, southern Corn Belt and Southeast, translate to a higher start to the soybean trade Tuesday and likely through the week, but because of earlier market positioning, the effects may be lightened.

"Are you going to have corn down sharply and beans up sharply? No," Roose says. "I would look for a market that deeply oversold."

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A fairly large corn acreage guess combined with a higher stocks number could knock the stuffing out of the corn trade, but ought to lend support to soybeans, one analyst says.

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