(IARN) — The U.S. Department of Agriculture’s (USDA) Prospective Planting report suggests agricultural producers will plant 97 million acres of corn this spring. A commodities broker anticipates this survey-based number to psychologically affect futures prices.
Jim McCormick, branch manager of Ag Market Net, says USDA’s corn planted acreage estimate could lead to a negative scenario.
“Ninety-seven million acres was higher than the average trade guess. Honestly, 97 million acres would be too many under the best of circumstances. With the demand destruction we’re seeing with ethanol, it’s setting us (up) to be pretty negative, if we would plant 97 million acres,” McCormick said.
McCormick does not expect 97 million corn acres to be realized. However, it will still create issues near-term.
“Even if you don’t believe that 97 million acreage number, that is what the government’s going to use when they release their new Supply and Demand report, which will happen in May. What I’m fearful of, in the near-term, (is) it’s going to hang over the market psychologically. You take 97 million plant acres (and) put a trend yield around 176, there’s a good shot the government’s going to be printing about a 3 billion carryout for new crop, project carryout. That’s going to be very negative psychologically to the market until we see that printed.
McCormick encourages against panic selling futures or cash.
“We’re near crop insurance levels, so your insurance is going to protect you from going down. You might consider a put. Maybe even a short-dated put, (which is) not quite expensive. That will protect you into these reports, but leave the top-side open,” McCormick said.
Story courtesy of the Iowa Agribusiness Radio Network.
