For we in the Ag world, the key topic of the day will be the USDA report but for the rest of the financial world, at least gauging from the tone of many articles this morning, we should be preparing for the soon to arrive financial Armageddon. The sharp selloff witnessed last Friday in equity markets has created quite a stir, which has reverberated around the globe in overnight trade and evidently many have come to accept that yes, interest rates will eventually have to go higher, which in turn will bring fire and brimstone showering down upon we lowly and unsuspecting minions. Many of you probably did not realize that the green horse (color of money) of the apocalypse from the Book of Revelation does not only represent physical death and disease but also financial, and is actually kept in a stall directly behind the Federal Reserve building in Washington, D.C.. I for one am in the camp that believes our equity markets have been held at artificially inflated levels due to the monetary policy du jour so a correction back to reality is inevitable. But in this era of feast or famine, black or white thinking, with hyperbole used to describe every situation and interpreted literally instead of figuratively, it is no wonder we find markets that swing wildly to each tidbit of information or situation that unfolds.
As I said initially though, for we Aggies it is about the crop production report this morning and of course the markets are at risk of pretty extreme swing at the whims of these numbers. I have commented about this previously but I can still remember a day with the USDA seemed to at least try and not make extreme changes from one month to the next in reports, recognizing that crop “estimates” are by no means an exact science but that “philosophy” if there truly was one, has evidently been cast aside like yesterday’s diet fad. Of course making that even worse is that there many traders, I suspect often times computer driven, that take the information at face value when released, which of course just compounds the volatility in the reaction. Regardless, numbers will be released and reacted to later this morning and here is one more set of survey estimates courtesy of Dow Jones; Total 2016/17 corn production of 14.974 billion bushels using a yield of 172.9 bpa. This is expected to leave us with a carryout this next year of 2.322 billion bushels. Total bean production is estimated to come in around 4.1 billion with a yield of 49.4 bpa. The average guess for carryout is 333 million. Wheat carryout is estimated to be 1.113 billion.
Of course after today, good, bad or indifferent, it will be actual yield data that should begin to take precedence in the mind of the trade. Undoubtedly we will be hearing all of the above, and if correct could be a bit of a disappointment for the bears who have evidently convinced themselves that since the computer modeling tells us we will have a near perfect crop this year, how could it be anything but?