Will the Bulls Take Control After the January Report?
Jan 03, 2013
USDA is scheduled to release its Quarterly Grain Stocks Report and its highly anticipated Annual Crop Summary for 2012 on January 11th. The January Report is the next focal point for grain and soy traders. I am a little apprehensive getting overly excited or overly bullish about this report, even though many bull's have been trying to build more length heading into the numbers. All I can say if just be careful if your waiting around on the USDA to help your bullish bets. Below are a few thoughts regarding the report:
- Even though total US harvested corn acres will more than likely be taken lower, will it really do that much to change "total production?" Currently the USDA is estimating 87.721 million acres will be harvested with a yield of 122.3 bushels per acre, for 10.725 billion bushels in total US corn production. Lets assume the USDA cuts harvested acres to 86.0 million and in turn is forced to bump yields higher to 125bpa. This scenario would actually give us an increase in total production to 10.75 billion bushels. What I am trying to say is be careful thinking just because "harvested acreage" is going to move lower that "total production" is going to follow. The more acres they cut from the harvested category, the higher the yield will likely push.
- Same type of scenario for soybeans. Yes, we could see a slight reduction in harvested acres, but hunch is the yield number jumps from 39.3 bushels per acre up more between 39.8 and 40.1 bushels per acre. Meaning total soybean production could push higher. I suspect however that total demand will more than offset any gains in total production.
- Wheat acres could move higher in my opinion. I know many areas were reporting very poor conditions during planting, but with such lofty insurance levels I believe farmers where eager to get the crop in the ground. The current USDA all winter wheat acres estimate could jump higher from 41.324 million acres. This could initially be interpreted as bearish, but ultimately I believe we are going to see a higher abandonment rate.
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Thanks again for reading my comments!