Current Marketing Thoughts
Kevin Van Trump
Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
Will the USDA Let the "Bulls" Run on Monday?
Sep 11, 2011
All eyes are focused on the USDA report scheduled for release Monday morning at 7:30am (CST). Just remember, the USDA has indicated that they will NOT be adjusting acreage changes from the FSA certified acreage data until the October report. In my opinion those could really be game changing numbers, so be prepared. Many in the industry are looking for a a cut of 100,000 to 300,000 in soybeans acres, and anywhere from a 200,000 to a whopping 1 million acre reduction in corn. The bottom line is that a reduction in corn acres of anywhere close to 500,000, with a yield of 150 or lower, and we will be staring down the barrel of a record low stocks-to-use ratio. More than a 200,000 acre reduction in soybean acres and we fall to dangerously low levels as well. The main reason I mention this is because I don't want to you to think that every thing hinges on Monday's USDA yield estimates and demand numbers, the "total harvested" acres are still the main key to this equation in my opinion.
For those of you looking for shorter-term price direction, I have include my best guess of where the market heads based on USDA "yield" estimates. Hope this gives you some type of guidance or direction. Remember, there is much more to the report than just "yield."
If the USDA Corn Yield is:
150 or higher - I believe we have potential to trade "Limit Down"
150 to 148 - I believe we trade in a $0.20 cent range from here, obviously dependent on what some of the other numbers indicate.
148 or lower - I believe we have potential to trade "Limit-Up"
It is almost crazy for me to make such broad sweeping comments, when we all know there is a ton of other data that will need to be digested on Monday to determine overall price direction, but with so many producers fixed on the yield number, I thought I would give you my two cents. I also wanted to include the average trade guesses and ranges that I have been hearing on my end to help you sort out the numbers on Monday morning.
Corn Average Yield Guess @ 148.8. USDA currently @ 153 bushels per acre. Range of guesses running from 145 to 153 bushels per acre. I am throwing my hat in the ring at or around 149-150, with potential for the yield to ultimately fall to 147.
Corn Total Production Guess @ 12.5 billion bushels. USDA currently @ 12.914 billion. Range of guesses running from 11.91 to 12.91 billion. I also like the 12.5 total production guess, if I had to pick I might error to lower side of the number.
Corn Ending Stock Guess "Old Crop" @ 974 million. USDA currently @ 940 million, last year the USDA was @ 1.708 billion. The range of guesses are between 929 million on the low-end up to 1.0800 billion on the high-end. I am think we end up lower than this and place my bets on the lowest end of the range, it actually wouldn't surprise me to see us fall below 900 million.
Corn Ending Stock Guess "New Crop" @ 635 million. USDA currently @ 714 million. The range of guesses are between 497 to 757 million on the high-end.My guess is that we end up between 600 and 700 million, because they will more than likely cut export and livestock demand to help offset production losses.
Soybean Average Yield Guess @ 41 bushels per acre. USDA currently @ 41.4. Range of guesses running from 40 to 41.8 bushels per acre. My guess for this report is at 41.1 bushels per acre or higher...I see no major adjustment made.
Soybean Total Production Guess @ 3.025 billion. USDA currently @ 3.056 billion. Range of guesses running from 2.925 to 3.085 billion. I have to believe the USDA keeps us well above the critical 3 billion level for the time being.
Soybean Ending Stock Guess "Old Crop" @ 232 million. USDA currently @ 230 million, last year the USDA was @ 151 million. The range of guesses are between 223 and 240 million. Once again I think we end up at the low end of the range, due to exports being better than most have anticipated. It wouldn't surprise me to see us down around 220 million.
Soybean Ending Stock Guess "New Crop" @ 152 million. USDA currently @ 155 million. The range of guesses are between 110 to 188 million. I doubt we drop much from their current estimates, as I believe they are questioning demand.
Wheat Ending Stocks Guess @ 667 million. USDA currently @ 671 million. The range of guesses are running between 628 to 705 million. I doubt we see any real significant move by the USDA, but if I had to bet I would imagine a slight downward revision could be int he cards.
Yield numbers from several of our producers in Illinois continue to come in much better than anticipated, while an equal number continuing to report a wide variety of both good and bad yield numbers. A couple of very good sources in the industry that are out in the fields in many locations have told me they have personally ridden with producers who have experienced yields below 50 bushels per acre in one field only to have production top 150 bushels per acre in another field right down the road. With yields all over the board like this I just find it hard to believe our national "average" will be able to hang in there. There is also some talk about much larger kernels in the field and better than anticipated "test weights." If you remember, I told you several weeks back that the blanks in the cob and the severe tipping could actually allow the kernels that were still alive to gain more weight than one might think. Well, that is exactly what has happened for many producers. In fact, there is talk circulating from a few "crop scouts" on the eastern leg of the Pro Farmer Tour that are indicating the fields they had checked during the tour are actually coming in 15-20 bushels higher than they had estimated, most likely due to better than expected test weights. Be careful however, thinking that your "test weights" are getting bigger just because the kernels are getting longer. One other thing we need to think about as we continue to hear about these better than anticipated yields is that the moisture levels on most of the good fields have been on the high end. Word out in the field is that moisture levels are running from just under 14% on the top of the hills, and on the burnt up plants, all the way up to 30% moisture on some of the higher yielding plants. With the lower moisture levels being on the fields that are producing the least amount of bushels, you have to be concerned about the expense and just how tough it will be to dry down this excessively large portion of the bushels.
I continue to believe the Ag markets will stick with their "pre-report" theme of selling off on any substantial rally. With better than expected yields coming in early, and no real weather threat in the forecast, some of the "Bulls" may feel they are a little overextended and may look to make some last minute adjustments. Better than expected export sales in wheat, and good numbers in corn may prompt a little early rally, but I would suspect it will be used as another opportunity to lighten the load into the report.
Personally, I am going to stick with being long soy over corn outright, and will be looking for an opportunity to add to the position if the report provides the opportunity. From a spec standpoint, I will be looking for any type of major break on Monday as an opportunity to add some length. From a producers standpoint, any type of limit-up move in corn, especially a push above $8.00 in the March contract next week should provide some additional opportunities to roll-up hedges, maybe even some opportunities to sell some deep out of the money $9.00 or $9.50 calls, and a real chance to pull the trigger on a few more cash sales. Have a good weekend, and lets hope the USDA gives the "Bulls" another opportunity to run on Monday morning!
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