Waiting Game Begins

March 26, 2014 01:05 AM
 

What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn and wheat futures are narrowly mixed, while soybeans are 1 to 4 cents lower. Cattle futures are higher with the April contract posting strong gains in reaction to higher cash cattle trade late Tuesday. Hog futures are mixed this morning.

 

* The waiting game begins. March 31 is a potentially trend-setting day for the grain markets. USDA will release its Prospective Plantings and Quarterly Grain Stocks Report that day. While there's still three-plus days of trading before USDA releases this key data, price action yesterday and overnight calmed from recent sessions, signaling traders are already settling into the "pre-report" mode. That doesn't mean there can't be big price moves, but it will likely take a little more to get markets moving as traders focus on positioning themselves for the key data.

The long and short of it: Traders know the potential for this data to move markets. As a result, they are less likely to put their necks on the line and more likely to go into the reports with relatively "neutral" positions.

* More soybean acres, fewer corn plantings. Traders are fully expecting USDA to show an increase in soybean plantings and less corn acreage for the upcoming growing season when it releases March 1 planting intentions next Monday. Somewhat surprisingly, many of the pre-report estimates are generally centered on the same levels -- roughly 81 million to 82 million acres for soybeans and 92 million to 93 million acres for corn. Quite honestly, those are acreage levels we (and others) have been talking about since late last fall/early winter. That's why there has been very little market reaction to pre-report estimates.

The long and short of it: March 1 planting intentions are little more than a good baseline from which to start in any year, but that may be even moreso the case this year. In talking to Pro Farmer Members, there seem to be more "swing" acres this year than in years past.

* Don't forget March 1 grain stocks. Barring a surprise on planting intentions, March 1 grain stocks will be the tone-setter. Traders have had a tough time pegging quarterly stocks, especially for corn, regularly missing on their pre-report guesses by hundreds of millions of bushels. And this year there's an added "unknown" -- the impact of porcine epidemic diarrhea virus (PEDV) on corn and soybean meal demand. As a result, traders are somewhat "flying blind" into the Quarterly Grain Stocks Report, which means there's an even greater chance for a shocker.

The long and short of it: The extreme unpredictability of the quarterly stocks data makes it the wildcard in next Monday's reports. Because traders know this and are growing increasingly concerned about being caught on the wrong side of the market going into the report, they are less likely take an aggressive position into the report.

 

Follow me on Twitter: @BGrete


Need a speaker for a seminar or special event? Contact me: bgrete@profarmer.com

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