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CBOT weekly outlook: Trade volatile ahead of USDA announcement

MarketsFarm — The Chicago Board of Trade saw “a wild ride of volatility” on Wednesday, following rumours of a U.S. Department of Agriculture farm aid package that could top US$15 billion.

The package would include payments of about $2 per bushel for soybeans and four cents per bushel for corn, according to Bloomberg. An official announcement is expected Thursday.

“The general thought was producers would switch over to soybeans as much as they could, in order to take advantage of the benefit of particular farm aid,” explained Terry Reilly, a grains analyst with Futures International.

Rich Feltes of RJ O’Brien believed the timing of the USDA announcement will also shift around seeded acres.

“It would have been better if they had come out with this in July, after all the crops were in the ground,” he said.

“Even though they’re going to try not to distort final planting decision, I think it’s going to have that impact.”

With details of the package unclear, traders are anticipating producers will stick with previously stated planting intentions “to the best of their ability,” said Reilly.

However, as flood conditions continue to hit the Midwest, Reilly predicted unplanted corn area may get switched to soybeans.

“We’ll lose 3.1 million acres from March intentions for corn, probably adding 1.2 million acres of soybeans,” said Reilly.

The amount of lost corn acreage may rise further as weather forecasts predict more rain.

“In other words, we’ll see a total acreage decline from March intentions,” Reilly confirmed.

Feltes agreed traders are scrambling to cut their losses as corn acres remain underwater.

“It’s fairly simple, we’re losing new-crop supply and managed funds are still short over 160,000 contracts of corn.”

Since both acreage and yield potential for corn is significantly down, corn is the “floor leader” with July contracts testing in the $4.05-$4.10 range (all figures US$).

Support from corn prices has lifted soybeans higher, around the $8.50-$8.55 level.

— Marlo Glass writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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