Monday USDA report moves corn, soybeans and wheat

March 10, 2014 05:54 PM
Grain & Oilseeds Report

Corn: Monday's USDA report offered bullish U.S. carryout news and bearish world numbers. Trade was looking for the U.S. carryout to rise from 1.481 to 1.488, and instead that carryout was actually lowered to 1.456.

All of this carryout reduction came from the USDA raising exports by 25 million bushels. This carryout increase should not surprise anyone in the market with the way the weekly export/sales reports have been running lately. There has not been a price level seen yet that has slowed that report. Keep a close eye on Thursday’s weekly sales report as that will reflect what demand was seen when old-crop corn briefly touched $5.

On the world side, the USDA raised total supply from 157.30 MMT to 158.5. That increase was significant but it is likely the U.S. carryout number will take more importance. Given that corn volume was quite low for a report day, it is likely more accurate to say funds were not present in this market today rather than to make a case they were sellers. Short-term fund activity (or a lack thereof) will guide this market the most. Longer term trade will start putting even more focus on acreage and spring weather concerns.

Soybeans: The USDA lowered ending stocks on Monday's report but not as much as the trade had thought they would. This led to a buy-the-rumor, sell-the-fact reaction to the report. The market had rallied $1.45-½ since the February report, and it was definitely susceptible to profiting if the bull was not fed.

As for the report, ending stocks were lowered slightly, from February’s 150 million bushels estimate to 145 this month. The trade had been looking for ending stocks to drop to 141 million bushels. While USDA did increase exports by 20 million bushels, that was partially offset by a 10 million tonne decline for domestic crush and a 5 million tonne increase for imports.

We anticipate exports to be raised on upcoming reports as even with Monday’s upward revision higher, the U.S. still has sold 93 million more bushels the USDA projected. The trade will now get concerned that USDA may manage ending stocks like last year when they refused to project ending stocks below 125 million bushels. During that time, ending stocks were left unchanged from February through September.

As for the world numbers, they lowered Brazil soybean production from 90 million tonnes down to 88.5. This was a little higher than the trade had anticipated. Argentina bean production was left unchanged at 54 mt. World soybean stocks declined from 73.0 last month to now 70.6. This is still an increase from last year’s 58.

As for price expectations, our bullish price target for old crop soybeans was filled weeks ago. There is just a little left to fill our $12.15 target for the November. As the trade will begin debating a soybean plantings in earnest now, we expect sharply lower prices after planting. We feel USDA’s Ag Forum estimates, released in February at +3 million, to be sharply increased after this month’s survey. Our downside target is $9.25 for November.

In additional news Monday that pressured the market were unconfirmed reports that China had canceled 20 cargoes of beans purchases from Brazil over the weekend. The trade will be on the lookout for more cancellations of US purchases…Jim McCormick

Wheat: Wheat finished the day lower. The USDA released their monthly supply and demand tables, and trade showed some disappointment to the lack of bullish information and met that with some moderate selling. The USDA left the numbers month over month unchanged and slightly increased world ending stocks, which sent the markets down in the May soft contract, the most active contract.

Wheat is currently ahead of the five-year average pace for exports but doesn’t appear to be changing the general trend as exports move on a fairly linear line through the end of the marketing year. The move lower is not going to change the general theme of this market as the trend is still higher and with first support coming in for the May soft contract at 620 and the gap fill at 605, we have plenty of support to continue the recent trend.

The USDA did not change exports, which some had expected with the recent situation between Russia and the Ukraine did add to the disappointment and sell off but trade will continue to monitor this situation closely. A recent warm up in U.S. temps is going to start to push some wheat out of dormancy, but the lack of severally cold temperatures also gives the trade little reason for concern.

Spring rains are the biggest factor for determining wheat yields, so continue to monitor weather as there are several of the large wheat growing areas in the plains still suffering through some dryness. Global stocks aren’t changing and speculation on U.S. production is going to be the biggest market driver moving forward.

About the Author

Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Steve Georgy is a Sr. Broker/Manager at Allendale, Inc. Jim McCormick is Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA.