Grains anticipate Friday's potentially volatile USDA report

Soybeans rally, while corn and wheat feel bullish

Corn: Trade is focusing ahead to the upcoming stocks and acreage report. Heavy bean buying attempted to offer support across the complex Monday morning. We also saw that trade’s expectation for the acreage report is 94.72 million acres. We know that acreage number, combined with trendline yield, can project down to 440 December corn.

What few people can predict accurately is the stocks portion of Friday’s report. Right now trade is expecting a stocks number of 6.150 billion bushels (the amount of old crop still on hand as of March 1). What is important to point out is that this stocks report has led to some of the most violent market reactions of any other USDA report. During the last four reports, we have seen one cause a limit higher move while the other three were all limit down. That is four limit moves on the last four stocks reports. This makes the report on Friday potentially larger in market reaction than the January crop report, which was just as volatile as expected. Use caution and keep this in mind when making trades this week for either hedging or speculating.

Weather lately has seen a cool off, right back down to average highs but looks to warm back up to above average for most of the corn growing areas in the coming weeks. Planting is still given a thumbs up; acres have every reason to still be big so the stocks report is the only true unknown right now. Be cautious this week, speculators can still buy near May support, hedgers can still sell at December resistance but know what to expect on Friday…Ryan Ettner
Soybeans: You can’t keep a good bean down! Beans found strength again as we approach the USDA report at the end of the week.

This report will have two parts: planting intentions and quarterly stocks. The average guess for planting intentions is at 75.393 million acres. That is an increase of 393,000 acres. We are at the lower end of estimates, coming in at 74.495 million acres. With our acreage survey, we should see beans down close to 500,000 acres. If we see USDA release our number, that should be looked at as friendly.

For the quarterly stock report, USDA has generally agreed with the private trade in recent reports. Aside from plantings, the market has been well supported also due to potential future reductions in South America’s crop. South America is getting into harvest and we are expecting to see another decline from them. This could total up to 2-1/2 million metric tonnes off production due to dry weather.

The charts are still in an uptrend and the next target could be close to 1400 in the coming days. We still feel old crop is overvalued but the funds and the charts are still bullish. New crop has reasons to rally and stay supported. As we have mentioned before, the South American issue is a new crop problem. The market will be volatile this week but should find support until we see fundamental change…Steve Georgy

Next page: We look at wheat...

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