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Archived Market Commentaries:
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Date:
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Jan. 12, 2010
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Headline:
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Closing Grain Comments
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Comments:
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USDA spoke. Speculators responded, "Get Me Out!" Although overnight trends had been lower ahead of this morning's USDA crop production, grain stocks, supply/demand & wheat acreage reports, those losses were magnified after USDA forecast record-high corn & soybean yields & production & lowered its projections for late season wheat usage. Speculators had positioned for bullish reports, & USDA disappointed them, sending specs scurrying out of ownership. March corn futures locked 30c limit down within the first two minutes of trading. New-crop corn contracts locked down its 30c limit by 11:17 am. March soybeans plunged 20c lower on the open, traded 41.5c lower by 9:34 am, rebounded modestly, & then retested its early lows late in the session. March wheat traded 41.5 lower within the first two minutes, & reached 52c lower by noon as USDA's forecast for the worst US wheat exports since 1972 & the largest ending stocks since 1988 offset news farmers had planted the least winter wheat since 1913. March corn futures settled 30c lower, March beans closed 32.5c weaker, & March CBOT wheat collapsed 36.75c on the day. Late buying by index funds prevented even worse beans & wheat losses.
USDA raised US corn production by 230 mb to 13,151 mb--332 mb above the average trade guess--on yield of 165.2 bu/ac--up 2.2 bu/ac from November. Confounding trade expectations for increased harvest losses, USDA added 336,000 corn acres to harvested acreage! Corn production & yields were both record-high. Although feed usage was increased by 150 mb & exports left unchanged, traders proved skeptical of those usage revisions since year-to-date trends don't support those trends. USDA projected corn carryover at 1,764 mb--up 89 mb above last month's S/D report & 151 mb above the average trade guess. If feed use or exports don't get better soon, carryover could get even bigger in later reports. The agency also increased world coarse grain ending stocks by 3.71 mmt to 180.23 mmt--near last year's 10-year ending stocks high. USDA did note after the reports were released that they would re-survey producers in areas affected by delayed harvest to verify yields for its March reports. Today's upward feed revision, however, left plenty of room to lower yields later without reducing carryover levels.
Soybean output was increased 42 mb to 3,361 mb--24 mb above the average trade guess--on yield of 44.0 bu/ac. Harvested acreage was lowered by 212,000 acres, preventing an even higher production result. USDA lowered its soybean carryover estimate by 10 mb to 245 mb as foreign demand pushed exports up 35 mb & crush 15 mb higher. That was still 8 mb above the average trade guess. USDA also increased its Brazilian soybean production estimate by 2 mmt to 65 mmt, & boosted world soybean carryover by 1.71 mmt to 59.8 mmt (2,197 mb). Record-high South American soybean production overwhelmed forecasts for record-high Chinese soy imports.
Winter wheat acreage was the main bullish number released today. Wheat sowing was pegged at just 37.097 mil.ac.--3.919 million below average guess, 6.214 million below last year, & the least winter wheat acreage since 1913. Soft red winter wheat acreage was forecast at just 5.92 million--1 million below the average guess & down 2.409 mil.ac from 2008. USDA reported that SRW wheat acreage was record-low in Illinois (350,000 acres, down 59% from last year), Indiana (300,000 acres, -36%), Missouri (420,000, -46%) & Ohio (800,000, -21%). Acreage report support was more than offset by projections for an increase in May 31, 2010 carryover stocks. USDA lowered wheat export by 50 mb, feed use by 20 mb & seed demand by 6 mb, raising ending stocks by 76 mb to 976 mb--the largest wheat carryover since 1988. USDA now foresees the smallest US wheat exports (825 mb) since 1971-72. Illinois wheat stocks on Dec 31st were pegged at 55.341 mb--down just 2.944 mb from Sept 1st. At that horrid usage pace, Illinois had 59 months worth of old-crop wheat on December 1st!
Chicago options on futures forecast corn would open 10c lower overnight, & Midwestern elevators applied that amount of protection on afternoon corn bids.
Soybean & wheat basis improved a penny this afternoon as river freight costs cheapened demand for barges dried up on the sharp CBOT losses. Price recovery now looks to depend on some weather woe befalling South America this winter, Russia by late spring, or the US by next summer.
Would you like CBOT futures prices reported to your phone? Top Ag can send you nearby & harvest futures prices for corn, soybeans & wheat at 9:45 am, 11:15 am & 1:45 pm each day. We provide the service for free, but you may have to pay for text messages--depending upon your phone plan. Give Scott, Mike or Seth a call at the Okawville elevator at 243-5293 & we'll get you set up!
"Closing Comments" are written by David Marshall, Toay Commodities Futures Group LLC, Nashville, IL. To learn more about his farm marketing advisory or commodity brokerage 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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