Current Marketing Thoughts
Kevin Van Trump
Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
Are You Ready for the USDA Report Tommorow???
Sep 11, 2012
USDA's September crop report scheduled to be released tomorrow morning (7:30am CST) should garner most of the attention early this week. The trade will be focused on several key data points, below are a few of the main ingredients:
- Corn Yield - USDA currently at 123.4 while most in the trade are now talking about a sub-120 type final yield number, some respected sources now thinking a sub-115 bushel yield is possible.
- Corn Production - USDA currently estimating 10.779 in total US corn production. Trade seems to be thinking somewhere between a 9.8 and 10.35 billion bushel crop is much more accurate and realistic.
- Corn Harvested Acres - Once again a highly debatable subject. The USDA is currently estimating there will be 87.4 million harvested corn acres. The bulls will argue this number needs to come down closer to 84-86 million harvested corn acres, while the bears will argue that the 87 million number is close to accurate since the total planted acreage number is more than likely going to jump higher on the updated FSA estimates.
- Soybean Yield - Did the rains the past few weeks help those producers most in need or will we see the soybean yield continue to drift lower and lower. The USDA is currently estimating a 36.1 soybean yield. My guess is once all of the smokes clears and dust settles we ultimately end up a little lower than this, somewhere in the 34-36 bushel per acre range is my guess. Maybe even a little lower. Keep in mind last years soybean yield was 41.5 bushels per acre.
- Australian Wheat - The USDA is currently estimating total Aussie wheat production at 26 million metric tons, the trade however is thinking this number could ultimately fall to 18-22 million metric tons.
- Russian Wheat - The USDA is currently estimating the Russian crop at 43 million metric tons, well below the 56.23 million Russia produced last year. The problem is the trade thinks total Russian wheat production could easily fall below 40 million metric tons before all is said and done.
Hedge fund money has been pouring into "commodities" the past several months as investors speculate on the promise of additional economic stimulus coming from the US, Europe and China. My question is what happens "IF" the powers-that-be disappoint? From the reports circulating the past few days, money flow into commodities just recently hit a new one-year high. In return, gold has traded up to six-month highs, copper has been seeing terrific gains the past few weeks, the corn and soybean markets recently ran to all-time highs and the energies have strong the past several months. The bottom-line is "money-flow" has been steadily pouring into the commodity sector on hopes of more quantitative easing. The CFTC recently reported "managed money" had increased their bullish bets on commodities to more than $111 billion as of last week. The fear as we approach another Fed meeting (this Wed/Thu) is that they could disappoint the trade by electing to "do nothing." Connecting the dots you have to figure if the funds have been adding length in anticipation of the big carnival coming to town, a few might get cold feet as they get closer to the front of the line. Essentially meaning fund managers who are scared about the Fed's rhetoric may reduce some of their long exposure heading into the big event this week. As we saw yesterday, just the slightest in fund liquidation could cause a few ripples in price. I do NOT look for this to be a longer-term trend or reversal of "money-flow."
As for today, I suspect we will see more market consolidation ahead of the USDA report tomorrow morning and the highly anticipated Fed announcement Thursday afternoon. I continue to like the thought of being a buyer of Dec12 corn on the breaks and staying long bull soybean and soybean meal spreads. Spec's should continue to remain long going into the report, just make sure you are comfortable with the risk you have on the board heading into the numbers. Producers looking to make sales should pay close attention to the price action the next couple of days, a bullish USDA report followed up by a bullish announcement of more economic stimulus by the Fed could give us that pop to the upside we have been waiting for. Specs may want to use the initial upside momentum (if it occurs) as an opportunity to bank more profits. With the Fed meeting following up the USDA data (the next day) a few of the funds might opt to take a little exposure off the books if they can catch a bullish number. In other words there is a chance you could see a "buy-the-rumor / sell-the-fact" type trade following an extremely bullish report.
If you would like, I can send you our Supply and Demand worksheet that will help you understand exactly where the trade is estimating the numbers tomorrow. If you would like to hear more of my commentary on tomorrow’s numbers, follow the link below to receive a Risk-Free 30-Day trail to my report. I will get our information out right AFTER we have a chance to digest the numbers and report the specifics.
Van Trump Report