Grains Show Strength Ahead of This Friday's USDA Report
Sep 27, 2011
Had a better day in the grain markets today as the Greek vote gave some much needed confidence to the equity markets, which in turn spilled over into commodities. However, we are not out of the woods yet, as we need to keep our eye on the German vote scheduled for later this week.
From what I hear, the German parliament is due to vote on the bailout. Supposedly, the German "lower house" of parliament is scheduled to vote on the 29th (Thursday), and the "upper house" will vote on either the 29th or 30th. I am told the more important one is the lower house. The key will be whether Chancellor Angela Merkel can secure a majority of her coalition for passage. The original vote date was scheduled for Sept. 23, and there is some thought that the vote may be delayed once again from Thursday to Friday; it wouldn't surprise me if they bumped it back even further.
If this vote fails, the "outside" markets will be hit extremely hard. My gut is telling me the votes in both Greece and Germany will pass and the "outside" markets will start to stabilize, at least for the interim. I would have to imagine this provides some wind behind our sails and should prompt a "Risk On" type environment. Understand, though, this is just a hunch and we could just as easily see a major meltdown in Europe. There are players on both sides of the net, and no one really knows where the next volley will take us.
As for corn, I was pleasantly surprised by the export inspection numbers yesterday and the fact that of the 34.3 million bushels reported, Japan, China and the other Asian countries snatched 21.4 million. With some support and export demand coming back into the market on the break, the bears may start to refocus their attention on more South American acres being planted this coming crop season. Most in the trade are thinking that South America will plant an additional 10%. This is something we really need to keep our eye on now that both Brazilian and Argentine planting are under way. Corn conditions improving by 1% really didn't seem to have much of an impact, but should certainly confirm the fact that our national corn yield has started to stabilize.
As for soybeans, there are thoughts that tighter residual numbers could actually be much higher than the USDA estimated, ultimately leaving carryout tighter than the market has anticipated. Some of the bulls were disappointed that we didn't see the USDA drop soybean conditions this past week. The thought was that the freeze in the North would have done enough damage to prompt a slight downgrade...obviously not enough.
We need to be aware that this Friday's USDA corn stocks report could hold a few wild cards as well. Remember, the Sept. 30 USDA stocks report was the one last year where USDA magically found 300 million bushels of corn. There seemed to have been some confusion over whether the bushels they counted were from old crop or the new crop. In any regard, the corn market broke some 50 cents on the news. Just wanted you to know anything is possible, so don't downplay the report this week as being significant only for wheat. Look for fourth-quarter feed residual and ending stocks to be debated.
If you aren't taking my report, you need to at least get the trial run, especially before this Friday's USDA report. Last year, it was a game changer. We have made some terrific cash sales and have some fantastic hedges in place, preparing ourselves for the recent downturn in grain prices. If you are not receiving our daily e-mail, make sure you get signed up for the FREE trial by following the link. There is absolutely no cost or no obligation. Sign me up for FREE "The Van Trump - Farm Direction Report"