An Insiders Look At Tomorrows USDA Report...Corn & Bean Prices???
Dec 09, 2010
Special Update: Dec 9th
I have had several clients call with additional questions about Friday's USDA report and what to look for specifically in regards to Soybeans & Corn. Hope this gives you additional insight.
From what I am hearing most of the big boys are looking for lower corn ending stocks due to an increase in Ethanol production. As of right now the average analyst guess is coming in around 800-810 million bushels. There are a few guys that have stuck their neck on the line and have thrown out a few crazy numbers. The lowest I have heard is around 610 million and the highest is around 875 million. Anyway you slice it we will be well below last years carryout number of more than 1.700 billion. Yes, I anticipate they will increase the amount of corn they are estimating for ethanol usage, however I am not so sure what they will do with their estimates for corn used for livestock feed. If you remember back to the "magical" report in the summer were the USDA found the extra bushels and I told you they might wait until the Dec report to take them back out...tomorrow could be the day. Even though there is no rhyme or reason for it, the USDA could actually take more bushels away from the ending stocks by raising the feed used for Livestock. They are eventually going to need to catch this number back up. Who knows, maybe we won't see it happen until the Jan report. I know its tough to imagine considering there is so much available feed wheat both domestically and globally, I just think the USDA might have overdone some things in the past in this area. It wouldn't surprise me to see them offset the increases in demand though with some type of decrease in exports. Remember this time around the USDA will be focusing on "Demand" we shouldn't see any real US "Production" numbers until the report in January. Ethanol and Feed Usage are the wild cards...
Soybeans could be an entirely different bird. Massive exports should more than likely tighten the USDA's domestic carryout estimate. Most analyst are looking for something in the 160-167 range. It is tough to disagree if you figure during the first three months of the marketing year we have already sold more than 1.200 billion bushels (more than 180 million ahead of last year). Do you realize that we only need to sell a little more than 365 million to reach the USDA's current estimate of 1.57 billion, I am fairly certain the USDA as well as myself believe we can do this in our sleep. Therefore they will more than likely adjust the number higher. How much higher...who knows. One thing for certain, if they drop ending stocks below 150, which they could very easily, we will be off to the races. On top of exports many feel the crush number will also rise, putting a "double whammy" on the market. In any event Soybeans look to be more explosive to the upside than does the Corn market, especially considering that ending stocks could fall to the lowest level in years, and the soy stocks to use ratio could fall to the lowest levels in the past 60 years.
Knowing just how difficult it can be predicting demand, I have learned that corn tends to be tougher to judge than beans. For some reason though the USDA generally tends to error to the high side in in their Dec soybean numbers. If the trend continues bean carryout may not fall as low as some believe. I think a significant cut is already factored into the market...it is going to take a complete shocker to push us substantially higher.
With both markets I prefer to reward higher price action by taking profits off the board and making some small incremental cash sales. With the funds massively long the trade may be setting up for a proverbial "Buy the rumor, sell the fact" type of action. Not that I am bearish by any means, I just think between now and the end of the year the funds may look to take some length off the board and bank some additional profits.
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