Current Marketing Thoughts
Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
Will USDA Conservative Approach and Trader Uncertainty Keep Markets Volatile?
Aug 12, 2014
There were many in the trade that thought that before todays USDA report, that a 170bpa yield estimate was a given. The majority of estimates from crop surveys were will above the USDA 165.3bpa yield that was given this May. We have all heard of about the near ideal conditions that most of the higher yielding production areas witnessed during this crop years pollination. Add to that, the cool summer weather, with above average rainfalls, most of the corn crop enjoyed after pollination, up until the past three weeks. I mentioned today in my morning report, that if the USDA, takes a conservative approach, as I believe they have, with the 2.1bpa increase, the trade will have to digest and fear higher yields are coming in the Sept-Jan reports. In other words, the corn market might not bottom-out until post harvest or during the 4th quarter of 2014. Remember, the markets don't trade data and or numbers, rather they move based on the "psychology" of the trade. My point is the bottom won't be in until the trade believes the USDA and other analyst have clearly OVERESTIMATED the upcoming crop. It seems that if the weather stays favorable, in finishing the corn crop this year, and the crop tours continue to see above average production estimates you can see the markets comfortably trading a 172bpa type final yield number and possibly as high as 175bpa. I think anything beyond 175 however seems to be a bit of stretch and may ultimately set the bears up for a bit of disappointment in regard to total production. CLICK HERE for my daily report...
There were many soybean traders that were totally uncertain on the direction and tone that this mornings report would show us. There were may in the trade that thought for the same reason the corn crop was getting larger this year, the same would hold true for the soybeans. Moderate temps through most of the summer and adequate rainfall have been there to support a big crop. Though the USDA current estimate at 45.2bpa would produce a record crop, many in the trade were poised for an aggressive move higher in yields. Yes, things have been dry over the past few weeks, but with near ideal conditions for most of the growing year and catching a couple of late August rains and a higher yield was a given. On the other side of the fence, the bulls have seen in two of the biggest years for bean crops, 2004 and 2009, the bean yields actually get lowered in the August report before trending higher towards the end of the year. Still a bigger bean crop but a little reprieve to make some catch up sales. It seems most feel the bean crop is getting bigger but the question is how do we get there? We saw the USDA raise the yield mere .2bpa, to 45.4, bringing total production to 3.816. The weather uncertainty could keep the trade on its heels awhile longer, as moisture will be the key factor for price direction, but if we catch a couple late rains, all bets are off, as beans should trend lower. CLICK HERE for my daily report...