Analysis Of Why Corn Price Fell The Limit Following USDA Report

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Corn prices have taken a nosedive in the wake of some eye-popping numbers released by USDA. And some experts say President Donald Trump’s trade assistance package had a lot to do with the big corn acreage and carryout estimates behind the market drop.

Based on resurveying farmers and analyzing other data, USDA now estimates farmers planted 90 million acres of corn this year. According to USDA’s Farm Service Agency, producers were unable to plant another 11 million corn acres.

USDA also estimated carryout from this year’s crop at nearly 2.2 billion bushels, a considerably higher number than the trade expected. September corn futures promptly fell the limit of 25 cents to $3.85 a bushel Monday afternoon.

University of Illinois economist Scott Irwin says it appears that farmers planted as much corn as they could after the announcement of Trump’s latest Market Facilitation Program in May, and that a lot of that corn acreage was originally intended for soybeans. “We will never know for sure, but the timing of the release of the MFP2 payment program, with its coupling to planting something, may have actually sealed the doom of the corn market this year,” Irwin wrote on Twitter.

Remember: The one thing USDA officials said they didn’t want to do with MFP2 is influence planting decisions. They may have done just that – to the benefit of corn users.

Here’s the acreage math: The total amount of planted and prevent plant corn acres shot from 90 million last year to 101 million this year. The total of planted and prevent-plant soybeans fell from 89.5 million acres in 2018 to 81.1 million this year.

Keep in mind: Congress made prevent plant acres eligible for special disaster assistance payments this year, but the payments are likely to be fairly modest. USDA estimates prevent plant acreage across all commodities at 19.4 million. And total disaster payments for all ag disasters in 2018 and 2019 are capped at $3 billion under a bill enacted in June.

MFP analysis, payments coming this month yet
Farmers curious about how USDA officials calculated payments for this year should know more within the next two weeks.

“We’re working on our draft white paper. We’ll get that cleared and onto our website as soon as we can,” USDA Chief Economist Rob Johansson tells Agri-Pulse.
Johansson says USDA should on be track to send the payments to producers by the end of this month.

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