Friday, September 30, 2011

Another Classic USDA Head Fake or are we now entering Bear Market Mode?

Did today's USDA Sept quarterly stocks report with small grains summary represent another head fake by the USDA (comic strip as some call them) or was it an indication of more bear markets to come in the days, weeks, and months ahead?

The one saving spot or bright spot has been spring wheat as it has managed to bounce back into positive territory.

Below is a link to Country Hedging info on the USDA report; be sure to check out there thoughts.

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Commodity Comments

By Tim Emslie

The USDA surprised the market with much higher corn and wheat stocks in today’s Grain Stocks report, implying more feed rationing than expected.  Lower spring wheat production on the Small Grains Summary report offset some of the bearishness 
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It looks like might have spoke too soon in regards to the Spring wheat strength as it is now 20 cents off of it's highs.  I suppose that is why they said trade wheat sleep on the street's when I started this job about 10 years ago.

As for the market outlook i think we need to find some reason how we see herd sizes for livestock as big as they are while we have implied feed usage for corn and wheat as low as it has been for years.  Is it more DDG's or what is scoop there?  Perhaps the answers to the feed usage will provide direction to what fundamentally our markets are actually telling us?

Bottom line watch for some rather volatile markets as we move forward; keep in mind 2008 and the crash we seen then; but also keep in mind last Sept report and the following Oct report where the USDA found bushels or used the new crop theory.  Both seem possible while neither really seem probable given the price action over the past several months.

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