Wednesday, April 10, 2013

USDA Report Recap - Market Comments


Below is a USDA report recap


US Ending Stocks 2013

April #
March USDA #
Avg Guess
Range of Guesses
Corn
0.757
0.632
0.824
0.625 - 0.925
Soybeans
0.125
0.125
0.138
0.107 - 0.160
Wheat
0.731
0.716
0.731
0.700 - 0.755

World Ending Stocks 2012/13

April #
March USDA #
Avg Guess
Range of Guesses
Corn
125.3
117.48
120.2
108.13 - 125.00
Soybeans
62.6
60.21
60.1
56.76 - 61.00
Wheat
182.3
178.23
178.6
176.90 - 180.00

South American Production Numbers

April #
March USDA #
Avg Guess
Range of Guesses
Brazil Corn
74.0
72.5
72.90
69.10 - 76.40
Argentine Corn
26.5
26.5
25.586
24.0 - 26.50
Brazil Soy
83.5
83.5
82.543
81.0 - 83.60
Argentine Soy
51.5
51.5
50.502
49.00 - 52.00


It looked like the markets traded the US corn carryout numbers right out of the gates; but then as they got further into the report seen the world carryout numbers and things sold off.

Overall one probably considers the report a non-event; friendly US carryout versus estimates; but negative on the world carryout side of things.  At 12:30 we have corn near unchanged but spreads very firm, beans are off 3-4 cents, and wheat is down 15-17 cents.  Corn and beans are very close to where they were before the report came out and wheat isn’t much worse but it is off a few pennies.

Some talk is out there that the weakness in wheat is just as much from a buy the rumor sell the fact for the freeze concerns as well as the fact that we still have yet to see an USDA announcement for the sale of SRW wheat that was rumored to have happened last week. 

Overall the report tells me that weather should become more important and the fact that our balance sheets are tighter in the US then the trade had guessed should also be supportive; it just isn’t supportive today.  Think about it this way; the first thoughts after the March stocks report were that carryout would be 850 million bushels to a billion bushels for US corn.  But instead the numbers came in at only 757 million bushels; a 125 million bushel increase; only about 1/3 of the 400 million bushels that the USDA had found in the stocks report. 

I think if it wasn’t for the negative world balance sheet numbers that we could easily be limit up on corn; after all we did shoot up about 20 cents right after the initial release of the update USDA Supply and Demand report.

The big negative on the report is the increased world carry out numbers as seen above.  But keep in mind that most of that is coming from China and over the last couple weeks we have seen plenty of talk of China looking to buy wheat and new crop corn.  Some of my sources indicate that much of the grain stored in China has major quality concerns and might not be something that can be used.  So if our increased supply isn’t used able supply how bearish is it?

Watch to see how we close today as that will be important for the charts.  The other thing I would look for is wheat to move back to a follower; it had been leading the markets but today’s report probably says wheat should now follow corn again.  That doesn’t mean that wheat can trade on its own; it just means that its own story probably won’t be a headline like it has been.  After all the actual frost damage probably won’t be known for some time.

With the report behind US our marketing plans/ideas should start to focus more on weather and demand.  We dodged a bullet today and hopefully that gives us a chance to make some higher sales at better levels; but we also need to keep in mind that long term supply looks to increase and today’s report showed us that global demand might be a little softer too.  So we should realize that new crop corn and prices in general will have plenty of risk should weather not be an issue.

I haven’t seen much for updated basis values; I have calls in but no real response.  I would think that producer movement remains slow and that basis should bounce for corn; but it could be a little hit and miss as there are just so many areas that have an either extreme surplus or defeincey of corn.  Keep in mind that most ethanol plants are plugged for the next couple of months and the spread inverting more should also draw out more supply from the commercials as they won’t want to carryout corn in an inverted marketed.

Wheat basis is mixed; but I think it should have a downward bias.  Moisture in our area might help a little more old crop move; guys will feel a little better and might not hold as much if we wouldn’t have got this snow storm.

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