Grisafi: Trade Leery of Crop Production Report

November 8, 2010 11:16 AM

There’s a lot of risk ahead of USDA’s November Crop Production Report, which will be released at 7:30 a.m. on Tuesday. The risk, according to Indiana Grain Co. CEO Thomas Grisafi, is due to USDA’s dramatic drop in corn yield in October and the addition of 300 million bushels of corn carryover in the September 30 stocks reports.

Because of this risk Grisafi says he’s going into the report even on his trades, just as he did with the October report. He said at that time that there were too many questions to be answered and there was no real consensus on the report estimates. The shocker he said at the time was if USDA’s yield projection would fall in the 155 bu. range They came in with a 155.8 bu./acre yield estimate and that sent markets on a week-long run up in corn and soybean prices. 

Estimates for this week’s report average 154.6 bu./acre, with a range of 152.6-156.5 bu./acre, according to one large trading firm.

"I’ll go out on a limb again and say I wouldn’t be shocked if we got into the low 150’s. It’s possible. I’m not set up the right way for it. I’m flat again. There’s a time to take risk, but right now we’re just getting too crazy."

This craziness isn’t just in the corn and soybean prices either, he says. The dollar was stronger on Monday, which usually points to lower commodity prices. However, cotton traded limit higher and silver was showing significant price gains as well.

"Commodities are getting diabolic and we have weak outsides. Even with that, that wasn’t enough to stop the metal rally. We’ve seen some outstanding price action in sugar, grains held in there and wheat had a couple of good days last week."

While the market is fixated on the Crop Production report, but the big numbers Grisafi says may come from the USDA projections in the Supply and Demand report, which is also released at 7:30 CT tomorrow morning.  

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