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Archived Market Commentaries:
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Date:
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1-12-09
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Headline:
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Closing Grain Comments
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Comments:
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USDA shocked traders with higher yields, more harvested acreage, larger Dec 1 stockpiles, lower usage projections, & bigger carryover projections this morning. News that Argentina looked to remain hot & dry, & that China was again a big US soybean buyer were overlooked. Grain prices plunged to steep losses on the open, & settled mostly limit-down as last week's buyers scrambled to get out of their losing positions. Other commodities were similarly under pressure. Recession worries sent crude oil plunging more than $3/barrel, other energy contracts slipping downward, gold collapsing about $34/oz, & copper, silver, live cattle & lean hog futures lower on worries about reduced demand. March corn futures settled 30c limit-down, March soybeans 70c limit-down, & March CBOT wheat 59.75c lower--1/4c away from limit-down. Limit-down prices led to price protection after the CBOT closed.
Here's a summary of today's reports:
Corn: USDA pegged corn output at 12.101 mb, 81 mb above its November estimate & 119 mb above average trade guess. Corn yield was boosted .1 bu/ac to 153.9 bu/ac, & harvested acreage was increased by 463,000 acres. Noting that Dec 1 corn stocks implied reduced demand, USDA projected corn carryover stocks at 1,790 mb--up 316 mb from last month & the largest since 2006. The agency reduced export & feed use estimates each by 50 mb, decreased ethanol crush 100 mb, & lowered food use 35 mb. Increased US grain output & expectations for reduced world usage led USDA to raise its world coarse grain carryover by 13 mmt to 178 mmt.
Soybeans: USDA estimated soy production at 2,959 mb--up 38 mb from its Nov estimate & 49 mb above the average trade expectation. Bean yield was increased .3 bu/ac to 39.6 bu/ac & harvested acreage was increased 267,000 acres. USDA has struggled all season to get its corn & soybean acreage estimates correct, & today's report continued that trend. End-August soybean stocks were increased to 225 mb--up 20 mb & 36 mb above expectations--as rising output & a 30 mb reduction in crush offset a 50 mb increase in exports. In its world S/D report USDA lowered Argentine soybean output by 1 mmt to 49.5 mmt, but mostly offset that loss with reduced usage.
Wheat: USDA left wheat production unchanged at 2,500 mb. End-May wheat carryover stocks were increased 32 mb to 655 mb--55 mb above the average expectation--as exports were left unchanged, seed use was lowered 2 mb to reflect lower fall sowings, & feed use was decreased 30 mb to explain higher Dec 1 wheat stocks. Projected May 31st soft red winter wheat stocks were left at 153 mb. Hard red winter wheat carryover was increased 43 mb, white wheat ending stocks were lowered by 10 mb, & hard spring wheat, & durum carryover were also unchanged. In its world S/D report, USDA reduced Argentina wheat output by 1 mmt & decreased world wheat usage by 2 mmt, thus increased ending stocks by 1 mmt.
Prospective Winter Wheat Plantings were reported at 42.098 million acres--down 4.183 mil.ac. (-9%) from last year & 2.080 mil.ac. below the average trade guess. Soft red wheat acres were estimated at 8.29 million, down about 2.9 million (-26%) from last year. Illinois acreage plunged 350,000 ac (-29%), Indiana sowing declined 110,000 (-19%), & Missouri acreage collapsed 450,000 (-36%), & Arkansas crashed an incredible 650,000 acres (-61%). All SRWW states reduced sowings due to the late row crop harvest, high input costs, & the fall in wheat prices.
Last week's export inspections were below trade expectations for corn (20.013 mb vs 24-26 mb expected) & soybeans (23.228 mb vs 30-32 mb), but better than expected for wheat (19.613 vs 10-12 mb.) China bought 14.7 mb of US beans over the weekend. Egypt tendered for optional-origin February shipment wheat after the close. Taiwan, Saudi Arabia, Pakistan, & several other nations are also seeking wheat this week.
With corn futures having locked limit-down the last couple hours & soybeans reaching that point in the last half hour of trading today, elevators took price protection ahead of an expected lower start to overnight trading. Not counting that protection, wheat basis plunged 20c this afternoon, corn basis lost 5c, but bean basis edged 1c higher. Basis often widens in mid-January as farmer sales increase & then improves by late-January as movement lightens.
Be sure to check with your local Top Ag Agronomy Center for pre-season price opportunities. Need financing? Give Lloyd a call at 243-5293 or contact your local Top Ag Agronomy Center at Okawville, Trenton, or Pierron.
"Closing Comments" are written by David Marshall, Toay Commodities Futures Group LLC, Nashville, IL. To learn more about his services, contact him at dmarshall@tcfg-llc.com or call (618) 327-4370 (voice/fax) or (618) 314-0918 (cell). This commentary is not intended for specific trading strategies. We strive to insure this information is reliable, but we cannot guarantee its accuracy or completeness. Commodity trading involves risks. You should fully understand those risks before trading.
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