Answers for the October USDA Report
Oct 11, 2011
As I have been saying for months, this report could be a complete game changer. I have been including many specifics in my daily "Farm Direction" report; if you are not getting the information, make sure you get signed up by following the link below. You can check it out for a while at NO cost just to see if it is something you think might help you make better marketing decisions.
To give you a quick synopsis and my "two cents," I have included some thoughts below:
- The market is estimating the USDA will bump the corn yield from its current 148.1 estimates up closer to 148.9. I have heard guesses coming in as low as 145 to as high as 151. With this in mind, anything below 148.5 has to be considered somewhat bullish, above 149 will be considered bearish.
- I really don't think "yields" will be the game changer, I believe "harvested acres" will be the key to the equation. Right now, harvested acreage is being estimated as low as "unchanged" at 84.4 million acres to being reduced by as many as 1.2 million acres. I am thinking a reduction somewhere between 400,000 and 500,000 acres will be viewed as neutral, anything lower will be bearish. The satellite imagery gurus are thinking that the crop is overstated by 750,000 to over 1 million acres. It will certainly be interesting to see who is right... Remember, the FSA numbers are being made available to the USDA for this report even though they are not being released to the public until Oct. 15.
- My fear is that the trade seems to be aggressively leaning to the "bearish" side of the boat heading into this report, while some of analysts I respect most are thinking sample test plot data is showing continued lower yields. With this being said, I would suggest reducing your exposure to the bare minimum, as someone is going to be massively wrong. Therefore, money flow should be extreme, and I would suspect a limit type move in one direction or another off the data.
- The trade is also leaning to a bearish soy report, which I am also NOT in agreement with. Not that I am wildly bullish, I just don't see yields jumping much, and I don't see the USDA reducing demand by much, either.
Our "bear spreads" that I recommended weeks ago in both grain and soy have banked great profits, and I will continue to ride them through the report. If I had to be long or short outright futures, I would prefer to play the game from the long side rather than the short side at this juncture.
I still have several concerns and questions that need to be answered moving forward, and that is why I am sticking with my "bear spreads" and would only suggest being very moderately long any outright futures.
Additional concerns and things to consider moving forward:
- Money flow associated with the European debt situation prompting a "risk off" type environment.
- Ukraine exporting tax being removed, adding more Black Sea grain supplies.
- South American corn acreage thought to be up some 10% to 15% this coming season.
- Thought that U.S. corn acres may jump beyond 95 million harvested acres next season.
- Massive amounts of global feed wheat still available as an alternative.
I have many more details and numbers that are included in the daily "Farm Direction" report, so make sure you are getting your copy each day. Thanks again and best of luck. You can sign up online by clicking HERE or you can call the office if you have any questions or need to get signed up: 816-322-5300.