Should You Be Selling After Today's USDA Report?
Nov 09, 2012
USDA's November crop report has been been released and as expected soybean production is raised substantially higher. USDA pushed the US soybean yield higher by 1.5 bushels per acre. In addition, also as I expected, they nudged the corn yield and production numbers higher as well. What I didn't see coming was the world ending stock number for wheat jumping higher. They also lowered US wheat exports. A move some had thought could happen simply because we are so far behind, others seem shocked by the news. Below are the specifics and highlights:
- US corn production estimates raised slightly higher. EU and Mexico production lowered just slightly. Corn exports and ethanol usage left "unchanged."
- US soybean production raised substantially, but most offset by higher usage. US soy yield raised by 1.5 bushels per acre. US soy exports raised by 80 million bushels to 1.345 billion, domestic Crush numbers also raised. No changes to the South American soy production.
- Wheat world ending stocks jump higher and catch the trade by surprise. Australian wheat production lowered form 23MMT's down to 21MMT's, but the EU was surprisingly raised slightly higher and Argentina, Russia, Ukraine and Kazakhstan ALL left unchanged.
To get the full list of the USDA numbers that you need to know about, we posted them here: http://farmdirection.com/wp-content/uploads/2012/11/VAN-TRUMP-REPORT-11-09-12.pdf
As for today, there seems to be a lot of talk from well respected analysts and traders about extremely "bearish" possibilities in the months ahead. Talk of corn in the $4.00 range and soybeans in the $10.00 range is now being thrown around the trade. I am not going to say this couldn't happen, because as we all have learned anything is possible. Just look back to how hard prices fell last year, only to be saved by more extremely "rare" weather related setbacks. The problem I have in getting bearish longer-term is the fact the "outside" macro market winds are going to be blowing at our backs (weaker US dollar) for another 4-years. Theoretically the "funds" should be friendly to the commodity markets, barring any major "new" unforeseen regulator hurdles that can't be jumped. Most of all, the investment world loves the bullish Ag story and understands the slightest hiccup could cause massive shortages, political unrest, riots, etc... I should also mention the weather is far-far from "normal." I know conventional wisdom would make one believe the weather is going to return to normal, and that record production is around the next corner and that prices are extremely "over priced." Just keep in mind the world has drastically changed, what you once viewed as normal or conventional is no longer the case. The Republicans keep trying to win an election by using conventional and traditional wisdom (doesn't seem to be working)...times have changed! Adapt or Die should be the motto. Like politics the markets are much different now as well.
***Remember, Informa will issue its 2013 acreage outlook today at 10:30am CST. US production implications for the 2013 crop year will be included in report. Watch for our weekend report to get our thoughts on the data.
For the rest of this story and more insight into understanding your marketing tendencies, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond. If you are looking to be educated and not just told what to do, simply click here and get started!
Van Trump Report