EHedger Afternoon Grain Commentary 9/14/12
Sep 14, 2012
Friday’s trade was generally supportive for grains but a profit taking selloff in the soybeans had the November contract 8 ¼ cents lower on the close. December corn closed 8 ¼ cents higher at $7.82 and December wheat 22 ¼ cents higher at $9.24 ¼.
Follow through strength from the weak dollar and strong outside markets helped grains start the day sharply higher. The Fed’s decision to extend their QE program has undoubtedly been the catalyst for the falling dollar over the past two trading sessions. Crude oil was also sharply higher partly from the weak dollar and partly from the unrest in the Middle East.
We can see from today’s Commitment of Traders Report that the managed have been lightly reducing their net long soybean and corn positions as of Tuesday. Keep in mind this does not include numbers from Wednesday’s USDA report.
The biggest surprise to the market was the new crop corn yield of 122.8 with unchanged harvested acres (87.4 million). The average analyst estimate was 120.6 with 86.173 million acres. Naturally this resulted in a much higher US Corn Ending Stocks number at 733 million bushels (market estimate was 592 million).
Not only was the US corn carryout above expectations, the world carryout was another 3 million MTs more than the average guess. Even though these supply numbers are quite low, they were still above the expectations which is why we had a negative reaction on the report day. The EIA ethanol report was also a little "bearish" with lower production and higher stocks. Another aspect to consider is the negative technical formation December corn has right now.
Soybeans on the other hand obviously had a very positive reaction to the report. The report wasn’t overly bullish from carryout as much as it was for US production. The market was calling for yields to drop to 35.5 bpa and the USDA September estimate was 35.3. The average analyst estimate for total US production was 2.657 billion bushels and the USDA came in at 2.634 billion. The US Soybean data was slightly "bullish" while the World supply was a little more than the market had anticipated. The USDA left South American production unchanged (Argentina at 55 MMTs and Brazil at 81 MMTs).
The USDA wheat supply estimates were generally higher than the market’s expectations. The USDA did lower the Russian wheat crop by 4 MMTs but left the Australian and Canadian crops unchanged.
This report was not far-enough away from market expectations to create a large change of opinion going forward. The final stocks report for corn and soybeans may be the next major market mover at the end of the month.
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December Corn Chart
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