Grains Volatile After USDA Report

The USDA pulls a major surprise out its hat every so often and the Plated Acreage Report on Tuesday left some traders with their jaws on the floor. Most corn traders and analysts were expecting a drop in planted acreage this season for corn, but the final USDA number came in about 3 million acres above the average estimate. This, of course, sent corn futures plummeting and they closed limit down on Tuesday.

The damage has been done from the report, but luckily the corn market had already dropped substantially throughout the last couple weeks and it was oversold. Corn futures did stabilize today and actually closed 2 cents higher.

The supply and demand picture has changed significantly as there will be much more supply come harvest time if the weather cooperates through November. Much of the corn crop will enter the critical pollination phase in the next couple weeks and extreme heat during this time could cause major crop losses. The weather is expected to turn warmer in the Midwest, but we will have a better picture on the weather after the long weekend.

The corn futures market will be driven mainly by weather developments in the next month with an overhang of a new increase in expected supply. With corn trading at $3.69 a bushel, it will take some major weather problems for this market to break through the May high around $4.75.