New Acreage Estimates
Corn: Today Allendale and one other firm released estimates for the June 30 Acreage and Grain Stocks report. We noted in previous commentaries that for corn acres Allendale will not be in the crowd of other companies. We estimate corn acres will fall by 211,000. We respected the fact Missouri, Illinois, and Indiana will see problems as they just could not get it in the ground. Much of that will be offset though, by higher Nebraska and Iowa acreage. This more moderate approach also fits the studies we noted this week. They suggested corn acreage changes from March to June are more dependent on price changes than planting delays. The other firm releasing numbers today will likely be the low end of the group with a 1.9 million acre decline.
Direction: We must also clarify something here. Just because acres will be falling for corn does not mean we blindly buy at the market. If weather still looks good as we proceed into July then this market can go down. The key point is tighter acreage will limit that decline. We do like the long side for futures but only after another dime or so lower. On the option side today we were filled on the 3 way position. Keep in mind this is a longer term bullish position.
Trade Idea(s): (06/15) Buy Dec 408, risk 394, objective 440. Option Strategy(s): (01/23) Bought Dec 410 put @ 51. This as a starting point for a position to be built as the market moves. Closed 37 3/4. (06/19) Bought Dec 500 call/sold Dec 600 call/sold Dec 350 put for -2 cents (a credit), risk to -16 cents, objective +28 cents. Closed -3 1/4. Corn Technical Commentary: Corn tested Wednesday's low today at 397 3/4 and closed below the key 400 level.Â This is also below 62%, but if the market can quickly recover on Monday, it may not be all that bearish. There is still a long-term uptrend in place.
Cattle: The 2pm Cattle on Feed report was neutral to slightly supportive. USDA estimated Placements that were only 86.2% of last Mayâ€™s level. That was very close to the 87.7% level the average trade guess had noted. We have to say when youâ€™re talking big changes on these COF reports for estimates, the accuracy begins to suffer. These numbers were pretty darn close. Essentially the trade confirmed cattlemen would rather those yearlings stay on grass than in the feedlot right now. On the Marketing side, USDA indicated numbers leaving the feedlot last month was 91.2% of year ago. That was right next to the average guess of 90.9%. We do not consider that as bearish as it sounds. 1) Marketings should have been small, as cattle leaving feedlots right now were the oneâ€™s going in during fall/winter when placements were down. 2) There was one less weekday to market those cattle this year on the calendar. Overall, if you have to say something about the report it would be very slightly bullish the far deferreds. For direction our downside targets have not been moved for the summer. We will point out the stop was filled on our short futures position but it was filled at a small profit. While we can argue all day long about how right we are with our fundamental price projections, the market can have other ideas for short term movements. We will let this market rally a little into early look and look to resell.