How Corn & Bean Prices Will Respond to the USDA Report
Sep 09, 2010
All eyes will certainly be on the big USDA report out tomorrow morning at 7:30am CST. The floor traders are looking for the Corn yields to come in around 163.8 bushels per acre from the USDA. If we come in at or above this number the data will be perceived as bearish, with a record number of longs you can be assured the knee-jerk reaction will be much lower. I anticipate any break will be short lived as fund money will step in to protect their massive long positions and buy the market back.
If you are a producer and you are looking for an opportunity for re-ownership because you oversold too early, this may be a great opportunity. For those looking to get long this market look to buy on the break.
If we see the number come in closer to the 160 level we may see the market shoot higher. I think as move later into the day you will see heavy profit taking into the weekend, and longs will be once again banking a portion of their profits. With this is mind I think you will see the market pull-back off the run higher on any bullish news.
The final scenario you need to consider is that the USDA comes out with a number that shocks the market and is considerably lower than anticipated. This could happen, as this September report will not be like any in the past several years. You have to understand that with 86% of the US corn crop being in dent and 33% all ready mature (a year ago just 48% in dent) the NASS will be able to pull enough ears and dry down the corn mechanically to provide an accurate reading of the 2010 crop. This year’s September estimate should be like last year’s October report - the big yield surprise could actually hit this month rather than in Oct or Nov because the NASS has a greater share of their test plots harvested across the south. If you look back to the August report that NASS was able to pull ears and mechanically dry down 8% of its samples (all in the south).
I don't want to scare you, but I wanted to let you know how it could happen. If they pull from the test plots in the South they may project significant reductions in yields. In this scenario the market could trade limit up into the weekend.
Inside The Numbers:
Corn - The Yield # should come in between 160-165 bushels per acre. Anything greater than 164 will be a real short term bear. Below 161 and we will be off to the races.
Soybeans - Look for the Yield # to be in the 42.5 - 45 range. Anything above 44 will be short-term bearish. Below 43 and we will see higher prices.
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