Thursday, May 10, 2012

USDA Report Day - Limit up Beans? Limit down corn?

Markets are called mixed and VERY VOLITALE behind a USDA report that was out today.

Calls are all over the board; some saying comments about limit up on beans and limit down on corn; with wheat mostly called steady.  Outside markets are slightly supportive at 8:50 with equities up the DOW firmer by 80 points, crude up 60 cents, Gold up slightly, and the US dollar near unchanged to slightly weaker.

The big headlines are the carryout numbers which have old crop corn carryout at 851 million bushels versus an estimate of 758 and last month at 801.  Another day where the USDA says we will use new crop corn and new crop wheat instead of old crop corn.  This one is getting most off of guard because cash basis has been super strong as have spreads which is telling us that the product isn’t there.  I guess we will see if the market believes the USDA or not; if they do look for some serious weakness; some commented perhaps we see China jump in again?

New crop corn balance sheet came in at 1.88 billion bushels; just a huge number.  The majority of it comes from the fact that the USDA is using a yield of 166 nearly 20 bushels an acre more then this year’s crop of about 147.  Some are saying this is could be the most bearish number we see; I guess only time will tell.  I would think we have a long way to go before we have yields like that; but keep in mind what has happened with the wheat crop down south this year; it seems to have got bigger and bigger and had near perfect weather.  So I guess on perfect weather there is risk that the crop could actually get bigger?   Bottom line if this doesn’t get smaller and the crop doesn’t get smaller things could get rather ugly in the near future.  Add to that the fact that it seems like producers are undersold and under protected things could get interesting and not in a good way. 

World carryout is also bearish for corn; old crop at 127.56 up from last week and new crop at 152.34 which is a huge increase from this year.

World bean carryout 53.24 down from last month’s 55.52 and new crop at 58.07 up slightly from this year but down from last years 69.12.  Overall very tight and leaves the bean bull card on the table.

Wheat world carryout is friendly and maybe rather friendly with it coming in at 197.03 versus 206.27 last month, next years world wheat carryout is pegged at 188.13 another friendly number.

US bean carryout came in very friendly with old crop at 210 which was less then the estimate and less then last months 250.  Increased exports and increased crush.  The new crop is even more friendly at 140 million bushels which beat the estimates by 30 million.  This gets us very tight and perhaps helps save the day for the grains.  I guess time will tell; but overall it says bean prices need to go higher and ration off some demand.

Wheat lately has been a follower and that could be the same today; but overall wheat was friendly at 768 this year less then the estimate and a decrease from last month.  New crop also was better and maybe gets us out of the burdensome area that we have been; the world numbers seem to; new crop came in at 735 million bushels 70 million less then the estimate.

I guess today we will see if corn is still king; if you look at the numbers by them self you should see beans and wheat both very strong and corn very weak. 

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