Corn: For most of last week, as well as the first half of Monday, traders have been selling new crop corn looking for a potentially large new crop carryout number. It would be safe to assume that trade was likely getting prepared for a 1.900 to 2.000 billion bushel number Thursday. At noon Monday, trade put out an estimate of 1.714 billion, which is certainly large but maybe a good deal smaller than trade had been factoring. That instantly slowed the December corn selling, which could be a new pattern to expect going into the report.
If Monday’s estimate is correct, than maybe trade will feel they have done enough new crop selling for now. Old crop carryout expectations were almost right on with what trade was thinking. We had mentioned in the past that trade might have been “selling the rumor and buying the fact,” but it now looks like they are already buying “facts.”
When all is said and done the number on Thursday is most important. While we have no argument that the final carryout number will be somewhere around Monday's estimate, we do feel the USDA will give us a much larger number for this May report. Look for a little more subdued trade for the next couple days as today’s estimate was a little surprising, we will see if the report is as well…Ryan Ettner
Soybeans: Money flow was a big issue for the beans on Monday. The dollar rallied early in the session due to the election in France pressuring the euro. Once again, we sold more beans Monday morning.
“Unknown” bought another 110,000 tonnes of OLD crop. It seems like buyers have been focused on NEW crop lately, and it has been a while since we had seen a bigger old crop sale. This could be due to the talk that farmers in Buenos Aires Argentina plan to strike for four days. No grain or livestock sales during this time to protest a planned tax hike on farm sales of 350%. Demand is a big reason we are at these prices, and we have said before that we are the cheapest store for beans. As long as this continues, we are going to continue to see sales of old and new crop.
Estimates for Thursday’s report were released Monday, and the trade is expecting to see a decline of 36 million bushels of old crop. That is a reduction from 250 million down to 214 million. This will also be our first look at new crop carryover. We are expecting to see a number of 164 million for new crop. Estimates for new crop are higher than first expected. We were hearing talks of sub-100 million carryout levels a few weeks ago to now a number at 164.
Are analysts adding in an increase in acres already? USDA will not change acreage on this report. They will have to use the acreage number from March 30th. We will most likely see big volatility before Thursday’s report as we see positioning take place…Steve Georgy
Next page: What's up with wheat?
Wheat: Monday's wheat trade could be best described as boring as the market consolidated before the day's planting and crops ratings report as well as Thursday’s WASDE report.
Outside markets did pressure the market a bit early as the election results out of France and Greece pressured the euro and supported the U.S. dollar. The election results did not just affect the world currencies, but it also led to a risk off mentality across most of the commodity sector.
As for Thursday’s WASDE report, the average trade guess is for old crop ending stocks to come in at 778 million bushels. This is down from last month’s estimate of 793 million bushels. As for the new crop the trade is looking for ending stocks to be 782 million bushels.
Monday night’s crop progress report showed that spring wheat planting is continuing to progress at a fantastic rate. As of Sunday, 84% of the spring wheat had been planted and 47% of the crop had emerged. Last year at this time only 49% of the crop had been planted and 17% of the crop had emerged. The winter wheat continues to look good as 63% of the crop is rated good to excellent. Last year at this time on 35% of the crop was rated good to excellent. The crop continues to progress at a near record pace as 63% of the crop has headed out compared to 34% on average for this time of year.
Allendale is anticipating new crop ending stocks to come in at 916 million bushels. This would give the U.S. a stock to uses ratio of 41%. Our economic models suggest that this stock to use ratio puts economic value of wheat for cash wheat at $5.75. Futures could slide to $5.20 later in the marketing year. Allendale continues to have a bearish view of the wheat market. For this reason, Allendale continues to recommend hedgers take advantage rallies and sell wheat as we are anticipating the wheat market will make an addition leg down into harvest…Jim McCormick