Compared to January’s market-movers, the February USDA reports are projected to include relatively small adjustments.
“Traders are looking forward to the USDA report on Tuesday with the hope of getting new news to create greater movement in prices,” said Allendale’s Paul Georgy in the Allendale Wake-Up Call. “However trade estimates are expecting little change in ending stocks for corn, soybeans and wheat.”
“The February report tends to be a snoozer, but we do expect to see carryout stocks in both corn and beans growing, which could put additional pressure on the markets tomorrow,” agreed Jacob Christy of The Andersons.
Here is what the trade forecasts for U.S. ending stocks:
- Corn: 1.809 billion bu. average, which would be up from January’s 1.802 billion bu.
- Soybean: 445 million bu. average, which would be up from January’s 440 million bu.
- Wheat: 947 million bu. average, which would be up from January’s 941 million bu.
While those would only represent small increases in ending stocks, those upticks could happen against a challenging backdrop. Equity markets in U.S. and Europe both dropped sharply on Monday, with financial stocks taking the biggest hits.
The situation is putting pressure on the grain markets as well. “The overall trade is now building in a premium for some sort of global credit event,” said Mike Mock, senior risk manager at The Andersons. “They’re probably overdoing it a bit, but again, this has spooked the whole market.”
What should producers do? They may want to market their grain like the Super Bowl-winning Denver Broncos played football on Sunday: defensively.
“You win championships like that with good defense … and we think growers who act and monitor and manage risk defensively will be the winners here as we move through the next 6 to 12 months,” said Mock, pointing to the recent rallies in lower-risk investments like gold, silver and bonds. “Those are all signs that the overall trade is very nervous and taking protection. Farmers need to do the same.”