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EHedger Report

RSS By: Dustin Johnson

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 Bullish

Aug 12, 2013

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Corn and soybeans rallied sharply Monday after a bullish USDA report.  The monthly WASDE report surprised the market by lowering the corn and soybean yield estimates as well as reducing total soybean acres.  December corn settled 10 ¾ cents higher at $4.64 while November soybeans climbed 43 cents to finish at $12.25 ¼.  Wheat was 1 ½ cents higher at $6.35 for the September Chicago contract.

The market had been waiting for the USDA to raise their corn yield estimate to 157.72 but the USDA obviously isn’t as optimistic with an estimate of 154.4.  Their US and World ending corn carryouts were both below the average analyst guess which added to the strength.  Soybeans had a similar surprise with an average yield of only 42.6 and a 500,000 acre reduction from their July estimates.

The USDA is projecting a 2013 soybean carryout of only 7% of total use while corn is 14.5%.  This may be why we continue to see soybean prices rally faster than corn on a relative scale.  It is important to note that the managed money has a very large spec short position in corn.  Will the USDA’s yield estimate cause them to reduce their position? If they decide to liquidate their shorts it could provide some underlying support for corn over the next 2 weeks.  We were at new lows for the move this morning and then outpaced Friday’s highs.  This key reversal may also be a reason for the market to find a short covering rally.  Still the fact that corn and soybean ratings are both holding steady at 64% may keep the funds content with their shorts and ride out the harvest to see what we end up with.  Our opinion about yield has not changed from this report.  We still see significant downside risk even at a 1.8 billion bushel corn carryout, especially this spring if South American weather looks normal.  We recommend staying well hedged between your cash sales, brokerage account, and insurance.  You can look at inexpensive December corn calls as a way to protect previous sales.  Please call an EHedger risk manager if you would like to discuss a more detailed plan for your operation.  Have a great week!

December Corn

USDA 2013/14 US Corn & Soybean Crop Production

 

Aug USDA

Average

Range of Estimates

Corn

154.4

157.721

154.0 - 161.2

Soybeans

42.6

43.472

42.0 - 44.4

 

 

 

 

USDA 13/14 Ending Stocks

 

 

 

USDA 13/14

Average

 

Corn

1.837

1.971

 

Soybeans

0.220

0.263

 

Wheat

0.551

0.573

 

 

 

 

 

USDA 13/14 World Carryover

 

 

USDA 13/14

Average

 

Corn

150.17

151.090

 

Soybeans

72.27

73.591

 

Wheat

172.99

171.838

 

 
EHedger  |  866.433.4371
 
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EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.


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