Grains will react to key report, expectations

Grain & Oilseeds Report

Corn: (CBOT:CZ13) Some positive trade was seen in corn early in the session Monday before the grind lower resumed. It is most likely that the bounce came from some hopes that Tuesday's FSA acreage number could give something for the corn bulls to work with. That FSA acreage number will be released at 5 a.m. CDT Tuesday and could spark some short-term corn influence. There are no trade expectations for this number so we will simply need to react to what is given early in the morning.

Corn bulls might be able to use just about any number as an excuse to offer a bounce to this market. What we know is that the number will be lower than the current NASS number (what is seen on the supply/demand reports) so there will certainly be a way to spin it bullish. What is important to know is that this number will still be incomplete. No matter what number is given, there is no way to know for sure if all agencies have reported in yet.

For Tuesday, the best way to look at this number is that it will be more complete but by no means is a final number. If not all agencies have reported in yet, it is still possible for the number to be too low. On the longer-term outlook, a grind lower for this market is still expected. Early yields continue to beat expectations with the cash market directly reflecting that fact. Corn bulls might be able to use the number to offer a short-term bounce for this market. Corn bears still have the longer-term direction in their favor until yields start coming in below expectations or we are close enough to the October report for bulls to get excited about acreage again.

It is important to know that yields are much more important than acreage. Look at it this way, if you expect a 150 yield and instead see 160 that is a 6.3% increase. If we expect 97.4 million planted acres and loose 3 million, that is a 3.1% decrease…Ryan Ettner

Soybeans: (CBOT:SX13) The soybean market came out of the weekend on a negative note Monday on modest volume. Intra-commodity spread unwinding dominated Monday's trade. Coming into the week, the floor was estimating funds were long 157,900 soybeans, short 74,700 corn and short 47,000 wheat contracts. Monday's action suggests that they were liquidating all three, selling the soybeans and buying back the corn and wheat positions.

Adding to the soybeans weakness was weekend rains that should help at least some of the late developing beans. Additionally, there is more rain in the forecast for the end of the week that should give a bulk of the Midwest at least some rain. We do not think these rains are game changers because so much of the crop has stated to turn and drop leaves but it should help stabilize some of the crop.

The long range maps continue to show no risk of a frost for the next 15 days. The August NOPA crush came in 110.5 million bushels, which was down 11% for last month. The trade was estimating the crush to come in at 110.7 million bushels. Last month’s crush was the smallest crush since September 2011. The July crush was at 116.388 million bushels and the August 2012 crush was 124.773 million bushels. When you take the NOPA crush numbers and combine them with non-NOPA crushers, it looks like the USDA is correct in estimating old crop crush at 1.690 billion bushels.

Monday’s soybean inspections came in at 2.972 million bushels, which was within the range of estimates (2.0 – 4.0). Total bean inspections for old crop beans have now reached 1.332 billion bushels. Last week the USDA estimated exports sales for the old crop beans at 1.315 billion bushels. This means that in future reports the USDA will have to revise exports higher, which should correspond to an equal drop in ending stocks. The quarterly grain stocks report released at the end of the month should confirm that old crop bean stocks are literally at the bottom of the barrel. We continue to see the bean basis weaken as full scale bean harvest will be upon us within two weeks.

Technically, the market continues to be stuck in the same sideways range it has been in for the past 15 trading sessions. On Tuesday at 5 a.m., Chicago time, the FSA will update its planted and prevent planted numbers. The trade will be watching these numbers closely to get a hint as to what type of acreage revision we might see in the October WASDE report. It is the October WASDE report when the USDA merges that FSA acreage number with their numbers. Most in the trade are looking bean acres to drop due to prevented plant.

Allendale anticipated the soybean acres will drop 1 million acres on the October report. Allendale anticipates the USDA to lower the new crop ending stocks but it will take them several revisions to get there. We believe the true ending stock number is 113 million bushels. We don’t anticipate the USDA will post this low of an ending stock number this early in the marketing year. We do expect a rally back to the $14 area for November soybeans based on last week’s WASDE numbers and think the market will work its way to the $15 level when USDA recognizes our yield estimates of 39.0. Tuesday’s trade action will be dictated by updated weather maps and what the FSA come out with acreage wise…Jim McCormick

Wheat:  (CBOT:WZ13)

  • Weekly wheat export inspections came in at 46.024M bu, which was well above the estimates ranging between 27-32M bu.  Last week’s inspections totaled 31.7M bu.
  • Analysts are now estimating the Canadian wheat crop could reach 33 mmt in 2013/14, which is up from the 31.5 mmt previously estimated.
  • Rich Nelson suggests starting with a wheat acreage number of 56.53 mln acres less the 2.15 mln acres of uninsured wheat acres; we should see an acreage number around 54.38 mln acres on tomorrow’s FSA acreage adjustments. August’s number was 51.67 mln acres.
  • The wheat complex finished the session weaker due to a weaker corn and bean complex along with estimates of larger foreign wheat crops.
  • December Minneapolis wheat made another new contract low at 701’0 as an increasingly large Canadian wheat crop worries traders… Alex Bassett
About the Author

Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Steve Georgy is a Sr. Broker/Manager at Allendale, Inc. Jim McCormick is Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA.

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