Get ready for a new dynamic in today’s energy trade. In a major shift, the U.S. Department of Agriculture (USDA), the National Agricultural Statistics Service (NASS) and World Agricultural Outlook Board (WAOB) will begin issuing its major USDA statistical reports at 11:00am CST. For ethanol and corn traders, this is the most notorious report of the year! The December ending stocks report for corn has a five-out-of-the-last-six year track record of causing limit moves one way or the other. With corn stocks expected to hit a nine-year low and stocks dwindling at the fastest pace in 17 years, the fact that the report release has been switched to 11 o’clock central time tells grain and oil traders they'd better get prepared for some fireworks.
Still, while we all know the basic corn story, what makes this report so volatile is that all the ending stocks and demand data has to be balanced with crops in the southern hemisphere. While it is known that U.S. stocks are at a nine-year low, we have seen upward expectations of the Brazilian corn crop harvest that has risen by 290,000 Metric Tons MT to 72.2 MMT. While that was lower than earlier estimates, the upward revision may be one of many due to improving weather. Yet that may be hurt by a faltering crop in Argentina, which is expected to be revised lower by 1.5 million metric tons.
What oil traders need to watch out for is a sudden move around 11 am central time. While the corn number is most likely to have the biggest impact on the energy, other sectors of the report could have some influence as well.
China is spending more cabbage on cabbage. The oil market shook off some China good feelings when the CPI came out much hotter than expected. China’s cold weather is being blamed for surging food costs and cabbage prices have gone through the roof. While hot inflation may lower China’s quest for a looser monetary policy, in truth at this point, the sharp increase should be transitory.
Japan’s parliament approved a yen printing binge to try to ward off deflation Japanese style. The yen tanked but was offset somewhat by the disappointing data from China.