Still Need to Make Some Cash Sales?
Dec 09, 2011
Today we had massive dynamics shaping the trade. Money-flow was obviously being directed in whole by the events whispers, rumors and outcome of the EU Summit. With weather in South America becoming more of a concern, and the end of year USDA report just around the corner, I could see the market doing just the opposite of what seems rational. A lot will depend on money-flow and any how much risk will be coming off the table in the wake of the EU meltdown. In the short-term, IF the EU can stabilize, it wouldn't surprise me to see the markets make one last push higher, giving the bulls one last gasp of air before the overwhelming bearish data takes us hook, line and sinker towards the bottom of the lake.
On the "fundamental" side of the coin it is all about the USDA/WASDE report. Which is BEARISH across the board. Corn ending stocks jumped by 5 million bushels, world corn supplies jumped by 5.6 million metric tons. US Soybean carryout jumped by 35 million bushels, on exports being lowered by 25 million and the domestic crush by 10 million. Wheat is also bearish as the USDA drastically raised ending stocks by 50 million bushels on weaker US exports. Certainly the USDA report was bearish, NO argument on my part! Every number in almost every way was bearish, but is this anything the "bears" have not been betting on already???
Below is a summary of the numbers, highlights and any unexpected events:
Corn Ending Stock - 848 vs last month's 843 million bushels. The trade was guessing we would fall somewhere between 712 to 899 million bushels, the average guess was around 835 million bushels. I was thinking it would take a reduction or number south of 830 to provide much of a bullish bounce.
Corn Used For Ethanol - 5.0 vs 5.0 billion estimated last month by the USDA.
US Corn Exports - 1.6 vs 1.6 billion estimated last month. Most were thinking this number would be left unchanged or lowered to 1.5 billion bushels.
US Feed Usage - 4.595 vs 4.6 billion estimated by the USDA last month. Remember, the lowered it the previous month from 4.7 billion and everyone threw up their hands in disbelief. Most were thinking the USDA would wait until they have their final numbers and make one last adjustment on the Jan 12th report.
Chinese Corn Production - 191.8 vs 184.5 the USDA reported last month. Some are thinking China's corn crop could be well over 190 million metric tons.
World Corn Carryout - 127.2 million metric tons vs. 121.6 million metric tons
Soybean Ending Stocks - 230 vs 195 million bushels estimated last month. Most were thinking we would fall somewhere between 195 and 255 million. The average guess seems to be around 215 million.
US Soybean Exports - 1.30 vs 1.325 billion the USDA was estimating for soybean exports last month (down 25 million). Most in the trade are thinking this number could be lowered by another 25 to 50 million bushels, just like last month. The range of guesstimates were a reduction of 25-75 million bushels.
US Soybean Crush - 1.535 vs 1.635 billion bushels estimated last month. Even though I think this number is still a bit too high, I am hearing the USDA will more than likely not be adjusting this number at this time.
Wheat Ending Stocks - 878 vs 828 million bushels reported last month. The trade was looking for a number between 731 and 867 million bushels, with an average guess of 830 million. Last year we were at 862 million. Personally, I don't see much of a change coming down the pipes.
US Wheat Exports - Cut by 50 million bushels to 925 million.
World Wheat Production - 689 million metric tons vs 683.3 million tons estimated last month.
Understand, there are some guys trading on "facts" and some trading on "hope." As of right now the "facts" have already been placed on the table, while "hope" still remains up in the air. Point being, the casino is still taking bets on the "hope" side, while those who bet on the "facts" are more than likely already in.
I obviously can NOT guarantee you it will play out like this, but it certainly feels like the set-up. With this in mind I continue to preach making sales ONLY on the rallies between now and the Jan 12th report. If you need to sell 100,000 bushels, split up your sales into smaller increments and pull the trigger when the market rallies, DO NOT chase the market lower...at least not yet!
Of course if the EU folds up shop and calls it quits there is no where to go but lower. This is why I continue to urge producers to get profits locked in on at least 30-40% of your production. Right, wrong or indifferent there is just too much risk in the waters right now not to bank some of the profits. Lets hope these are our worst sales of the 2012!
Some data from today's report that you should consider:
- Corn production increased 1.0 million tonnes in the EU,up 0.7 in Canada and up 7.3 million for China. China’s endingstocks increased 5.3 million.
- Biggest issue is raising Chinese production from 184.5mmt in Nov to 191.8 today and subsequently raising world carryout 5.6mmt to 127.2mmt. This could certainly reduce the bull arguments for big Chinese purchases.
- US Wheat carryout raised 50mmbu. +25HRW +15SRW +10 WW. Australia raised 2.3mmt, Arg 1.5, Canadian 1.1. Net/net, world carryout up 5.9mmt
- World wheat endingstocks were forecast at the highest level in twelve years
- US Soy ending stocks jump form 195 to 235 with some anticipating this as just a quick stop on the way north of 300 million bushels.
- Bean Oil stocks up 200 million pounds, may have been one of the most bearish numbers on the board, should help anyone long meal over soybeans.
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