USDA cuts corn crop, still sees hefty supply. Market down.

In its July supply-demand update Friday, the U.S. Department of Agriculture lowered its corn crop forecast from its June report, due to an adjustment for its recent smaller acreage estimate of 92 million bu, but the news failed to support corn futures.

The government pegged the area harvested for grain at 84 million acres. Previously, in mid June, the USDA was projecting seeded area of 97 million and harvested for grain at 89.6 million acres.

The reduction in acreage lowered the production forecast to 15 billion bu, down from almost 16 billion in June.

This new production forecast is based on the same yield projection as a month ago, of 178.5 bu/acre. The yield projection is a mathematical trendline average and is not based on field surveys. 

Effectively, although lowering the crop forecast from a month ago, the USDA held on to an outlook for an extremely large harvest, scaring a great many traders out of their long positions.

The ending stocks projection was slashed to 2.648 billion bu, versus 3.323 billion in June. This is based not only on the smaller expected crop, but also on less projected domestic usage, due to a smaller feed use forecast than a month ago.

In the end, if the ending stocks projection of 2.648 billion bu is accurate, it would mean ending stocks are still up from 2019-20 by about 400 million bu, the highest level in many years.

Corn futures sank about 10 cents/bu immediately after the news. However, the sell-off was not just because of the USDA report. Weather forecasts slightly raised the amount of rain expected throughout the Corn Belt during the next several days.

The Dec corn future ending the session down 12 ¼ cents at US$3.44 ¾ per bushel.

Source: DePutter Publishing Ltd.

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