Dustin works with a wide net of large producers throughout the Midwest. His analytical market approach and objective hedge strategy development is specific to the needs of every individual.
USDA Report Slightly Bearish?
Oct 12, 2011
Grains finished mixed today with wheat sharply lower. December corn finished 4 ¼ lower on the day at $6.40 ¾, December wheat 34 cents lower at $6.26 ¾, and November beans 4 cents higher at $12.39 ½.
Today’s report was disappointing for the bulls as wheat and corn ending stocks both disappointed the average of estimates. The analysts that continue to call for lower corn yields found no reductions with an unchanged yield estimate by the USDA. Funds and large traders who may have been trading a lower corn yield may be rethinking their strategy at the moment which is a downside market risk if more liquidation comes from this.
World wheat ending stocks are estimated at 202.37 Million MTs which is up sharply from the last report in September (up about 4%). They were estimated to be up 76 Million Bushels here in the US alone which is a 10% increase. This was the most significant information on the report as the world has options. Why contract US corn out of the gulf when you have cheaper feed grade wheat you can buy from Russia or Australia?
Corn yield was left unchanged from the September report at 148.1 bpa as a national average. Most were guessing a little higher, but we did show another reduction in exports of 50 million bushels to help offset this. This combined with the Ending stocks rising to 1.128 billion bu from last year raised the carryout to 866 million when I believe the average guess was 800 million.
Beans were the only thing that were reported positive on today’s report with yield reductions to 41.5 and another decrease in ending carryout to 160. Now with S. American beans currently getting planted we may see any foul weather related stories keep beans supported and it is a La Nina year. Overall between corn and soybeans I am more favorable of NEXT year’s price as they both have to hold support and continue to compete for acres.
If I were to take anything away from this report today it would be that we are going to have a hard time sustaining significant rallies in corn and wheat. As producers we are at record corn prices for the month of October and selling additional bushels at these levels still makes sense.
For upside potential we can still look at buying bean calls and call spreads. If you would like to get our specific recommendations, please sign up for a 2 week free trial with the link below.
Chart: December corn. "you can see how we came off the 200 day moving average (grey line)"
Chart: November soybeans. "the majority of major moving averages are well above these levels and this was a friendly report"
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