USDA report recap - market comments 9-12-2012

This a.m. we had a USDA report that looks to be another non-event as the USDA made very little changes to our balance sheets.

For the corn balance sheets we seen old crop ending stocks come in a little higher then estimated as they where pegged at 1.181 million bushels which was about 150 million bushels above the estimate and by far the most bearish thing seen on the report. 

New crop corn balance sheet was pegged at 733 million bushels; an increase of 83 million from last month and also over 100 million more then the average trade estimate.  Production came in at 10.727 nearly unchanged with yield only drop .6 bushel per acre while harvested acres where left unchanged.  Overall I don’t think the market will believe this production number; most think the harvested acres are well under the 87.4 that the USDA is using.  On the demand side of things the USDA cut exports by 50 million bushels but increased feed usage by 75 million bushels.  Add in the increased starting spot and they pegged our carryout at 733 million bushels.  Bottom line is there is and will be debate on the crop size………..it probably won’t be known for sure until the January report and the market needs to keep in mind the huge demand cuts being forecasted.  We can’t afford a price break that doesn’t allow demand to be curbed or we have a legitamite argue that we run out of corn sometime next year.  Does that mean we have to go up today or anytime soon.  No especially considering that our supply nearby is going to be heavy..........maybe not like a normal year but still we will have around 10 billion bushels or so getting harvested in the next month or so. 

World corn carryout was also a rather non-event as the USDA left carryout near unchanged at 123.95 mmt versus 123.33 last month.  No major changes other then the old crop US carryout that spilled over into the new crop balance sheets as well as the world balance sheets.

Wheat numbers where unchanged with carryout at 698 million bushels.  The world balance sheet also seen very little changes especially considering some of the other estimates that have been out for production.  Perhaps this is still something to come later too?  Case in point the USDA left Austrailan production at 26 mmt; while just in the past few days we have seen estimates from 20-22.5 mmt.

The bean carryout for old crop was lowered to 130 million bushels; but new crop carryout was left unchanged at 115 million bushels.  Yield was lowered by .8 bushels per acre and production dropped by about 60 million bushels but ending carryout was unchanged.  To offset the lower starting spot and less production they lowered exports by 55 million bushels and cut the crush number down by 15 million bushels.   In my opinion the market is really going to need to do everything possible to curb demand.  Exports as example are way ahead of last year at this time yet the USDA is projecting nearly a 300 million bushel cut.

Here is a recap of report.

September USDA Supply & Demand Worksheet 

2012/2013 US Corn & Soybean Crop Estimates
	USDA September	Avg. Trade Guess	Avg. Trade Range	USDA August
Corn Production	10.727	10.400	9.860 - 10.780	10.779
Harvested Area	87.400	86.173	83.000 - 87.400	87.400
Corn Yield	122.8	120.600	117.600 - 124.000	123.400
Soy Production	2.634	2.650	2.400 - 2.739	2.692
Harvested Area	74.60	74.447	73.300 - 74.745	74.600
Soybean Yield	35.3	35.600	33.500 - 36.700	36.100

2011/2012 Ending Stocks Estimate (billions of bushels)
	USDA September	Avg. Trade Guess	Avg. Trade Range	USDA August
Corn	1.181	1.015	0.800 - 1.175	1.021
Soybeans	0.130	0.135	0.100 - 0.170	0.145

2012/2013 Ending Stocks Estimate (billions of bushels)
	USDA September	Avg. Trade Guess	Avg. Trade Range	USDA August
Corn	0.733	0.600	0.475 - 0.700	0.650
Soybeans	0.115	0.107	0.087 - 0.117	0.115
Wheat	0.698	0.709	0.670 - 0.795	0.698

2011/2012 Global Ending Stock Numbers
	USDA September	Avg. Trade Guess	Avg. Trade Range	USDA August
Corn	139.60	136.50	134.50 - 139.45	135.97
Soybeans	53.65	51.60	51.00 - 52.35	51.94
Wheat	198.64	197.25	196.00 - 197.65	197.59

2012/2013 Global Ending Stock Numbers
	USDA September	Avg. Trade Guess	Avg. Trade Range	USDA August
Corn	123.95	121.02	118.75 - 123.00	123.33
Soybeans	53.10	51.90	48.80 - 53.00	55.38
Wheat	176.71	174.50	172.00 - 178.00	177.17

Bottom line is report came off neutral to bullish beans, neutral wheat, and neutral to bearish corn.  Now is a 733 million bushel corn carryout bearish……….no.  But it isn’t bullish considering what the market was looking for.  At the end of the day prices need to maintain levels that allows the USDA demand cuts to be seen.  Price breaks that allow demand to stay at a high pace potentially open the door to much higher prices later.

For risk management purposes and marketing purposes we need to keep in mind possible black swan’s such as ethanol mandate waiver or a ban on exports……etc.  Basically something unknown at this time that catches the market off guard.  We also have to watch out for the fact that everyone is still bullish and today’s report probably doesn’t change that.   Top’s  in markets are made when everyone is bullish or no one is expecting the markets to break.  That alone at good prices should promote spreading out some risk.

We also need to watch for signs of demand slipping or picking up.  If we don’t see wheat demand pick up with the US getting some exports from the smaller crops in the world then we have plenty of wheat.  If demand doesn’t slow down for beans what could happened to prices if the SA crop is closer to this past year’s versus the big projection? 

As for the price action today look for it to remain choppy; closing positive would be good and help the charts out a little bit.  As of 8:45 we have corn off 7 cents which is about 12 off of it’s lows, KC wheat is down a penny about 13 off of it’s lows, MPLS wheat is unchanged up a dime from it’s lows, and beans are up 25 cents nearly 36 off of their lows.

A couple other announcements are DP for row crops.  For corn and milo we are giving free DP until the end of the year; 20 cent charge with 4 cents a month after.  Sunflowers are 30 days free.

We also started sending out mid day updates on the markets.  This is a voice recording around noon everyday with an update on what the markets are doing and why.  If you don’t receive please give us a call and we can get you added.

Thanks