Corn, soybeans, wheat react to government data surprises

Grain & OIlseeds Report

Corn: After a full week of waiting for the final stocks number of the 2012 crop, Monday's report certainly had a surprise worth talking about.
Trade was looking for quarterly stocks of 681 million bushels and instead saw a final 2012 stocks number of 824. Seeing a stocks number 143 million bushels higher than trade expected might suggest an instant 15 lower day. Instead, the corn slowly moved lower as it has been doing for some time now.

With the October supply/demand report not far away, it is possible that trade wants to keep selling slowly until we see how many acres are lost on that report. Combined with that is a harvest pace only expected to show 15% complete as well. Even though early yield reports are strong, it is still far too early to suggest that the USDA needs to raise yields again on the October report.

Looking ahead, we can now say that even if 3 million acres are taken away on the upcoming report, we are still talking about having enough supply to suggest a December price near $4 thanks to today’s added stocks. While some sort of technical bounce can be expected, the longer-term outlook continues to suggest a grind lower.

Another weekend has gone by with corn yields still better than expected. We must continue to expect a grind lower while keeping an outlook for what might cause short-term bounces…Ryan Ettner

Soybeans: The USDA threw soybean bulls a curve Monday as they surprised the market by increasing the amount of beans on hand at the end of the fourth quarter. The trade had been expecting for the quarterly stocks to come in at 124 million bushels. The quarterly stocks came in 17 million above this number at 141 million bushels.

The quarterly stocks number that the government gave us Monday is the number that they will use for ending stocks in the WASDE report on Oct. 11. This also means that now we have an extra 16 million bushels added to the new crop balance sheet that is classified as beginning stocks.
The USDA came up with these numbers by revising last year’s crop higher. They now state that the 2012 bean production is revised up to 3.03 billion bushels, up 18.6 million bushels from their previous estimate. They left planted acres unchanged but increased harvested acreage up 60,000 acres to 76.2 million acres. The 2012 yield is now estimated at 39.8 bushels per acre and is up 0.2 bushels per acre for the previous estimated.

Going back through history, we see that USDA tends to adjust the previous year’s crop due to their old-crop ending stock estimate. Essentially, with such solid numbers on exports and crush, they have nowhere else to turn to make the ending stocks number work. Since 1994, they increased production 10 times, lowered it seven times and left it unchanged three times. What seems interesting is since the boom in commodity prices, they have been increasing numbers. For the next few weeks uncertainty will dominate the trade.

Now that this report is out of the way, the trade will be awaiting the results of the Oct. 11 WASDE number. The current line of thinking is that the planted acreage will be lowered on this report. This October report is the first report that the USDA combines their acreage survey numbers with the FSA insurance numbers.

The trade will be looking for yield adjustments on this report, too. Early on, the common thought was the national bean yield would be lowered further from the September estimate due to the dryness issues of late summer. With early harvest yields being reported as “better than expected” some in the trade are becoming less confident that the yields will be lowered and perhaps even increased on the October report. Allendale believes that with only 11% of the crop harvested, it is too early to say the crop is getting smaller/bigger from harvest results.

In addition to the WASDE report, the fiscal battle Washington is going through will add to the market’s volatility. As I write this, it looks like the government, or parts of it, will be shutting down. This could have an impact on reports that the USDA releases daily, weekly and potentially the monthly WASDE report if it lasts too long. Once we pass these crises, we have the debt ceiling that needs to be raised or the government will default on its bills. This uncertainty will keep some market participants on the sidelines…Jim McCormick

Wheat:

  • Weekly wheat export inspections came in at 32.97M bu, which was slightly lower than the estimates ranging from 33-37M bu. Last week’s inspections totaled 43.05M bu.
  • Quarterly wheat stocks came in at 1.855B bu, which was slightly friendly as the average estimate was 1.913B bu.  Last year’s stocks totaled 2.105B bu.
  • Total US wheat production came in at 21.28B bu, which was slightly above the average estimate of 2.108B bu.  Last year’s production totaled 2.27B bu.
  • The wheat complex finished mixed on the day due on a neutral Quarterly Stocks report as stocks were lower than expected, but total wheat production was higher than estimated.  The KC wheat contract finished higher today due to a production number about 40M bu less than estimates.
  • December Chicago wheat had outside day down reversal on the chart today, but could still be a buy if we continue to find good export demand and short covering… 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. www.allendale-inc.com

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