Analysts: Be Prepared for Market Movers from USDA (VIDEO)

January 8, 2016 02:15 PM
Analysts: Be Prepared for Market Movers from USDA (VIDEO)

Some USDA reports can be ho-hum affairs, as the market yawns at the minor adjustments long expected by traders.

But January is a different beast. On Jan. 12, USDA will release four reports: Crop Production Annual Summary, World Agricultural Supply and Demand Estimates, Quarterly Grain Stocks and Winter Wheat Seedings.

“What we’ve seen the last several years is more market movement around this day than has been seen five (or) ten years ago because of the importance of the reports in the growing world economy,” said Brian Basting of Advance Trading, speaking on U.S. Farm Report. “These reports have been market movers, so I’d encourage your viewers to be very prepared for these reports on the twelfth.”

A key number to watch? Grain stocks, which the trade has estimated at 11.237 billion bushels for corn, 2.720 billion bushels for soybeans and 1.698 billion bushels for wheat.

“I think when we look at (these reports), the grain stocks report almost takes the greatest importance because it gives us the idea of feed disappearance in that September/October/November quarter, and that sets the stage pretty much for the entire winter,” Basting said. “Last year it was a negative number. The market never looked back from the December high last year until it got into the summer. Who knows what’s going to happen this year?”

Andy Shissler of S&W Trading will also be watching grain stocks. “I think because of the high basis in the East, you saw a lot of grain move to market, so the stocks report should be bullish,” he predicted, also speaking on U.S. Farm Report. 

Watch the U.S. Farm Report segment here:

That regional factor—where the grain is—will be critically important to growers as well. “Stocks are a lot tighter,” Basting said in an interview with AgWeb. “We’ll be watching what the inventory levels are in the eastern Corn Belt versus the western Corn Belt and how it might affect the cash market.”

For example, in northern Minnesota on Thursday, the Fosston Co-op had a cash price of $2.78 for corn with a negative basis of 75 cents and a cash price of $7.80 for soybeans with a negative basis of 85 cents. In contrast, Andersons Grain in Maumee, Ohio had a cash price of $3.62 for corn, with a positive basis of 9 cents and $8.44 for soybeans, with a negative 21-cent basis.

The data provided in the grain stocks report will also provide information about the pace of feed demand and ethanol usage. “The implied feed/residual number is worth monitoring,” noted Christopher Narayan of Societe Generale, who forecasts grain stocks of 11.250 billion bushels for corn, 2.712 billion bushels for soybeans, and 1.690 billion bushels for wheat. “… While we do not expect a significant change (in corn) versus the same period last year, any surprise from the livestock sector could skew that number.”

What else will be worth watching on Tuesday? The annual production numbers for corn and soybeans in 2015: Here’s what the trade expects:

Corn: 13.646 billion bushels.

Soybeans: 3.981 billion bushels.

“It’s not a lot of change related to what we had in November,” Basting said.

Still, those crop production numbers represent the final word on the 2015 crop, which could affect the trade’s predictions for other USDA figures.

It will likely make for a big, volatile day in the markets. “There’s no other date throughout the calendar where we get such a massive amount of information on the same day,” Basting told AgWeb.

As such, farmers will want to be prepared for whatever may come. “What we’ve encouraged producer to do is have a floor in place … and leave the upside open” via options, Basting said. “The market is full of surprise … and if your inventory is in the bin unpriced, you just don’t have any protection.”

Just this week, corn made new contract lows of $3.50 for March futures, illustrating just how bearish the market continues to be. For producers, such numbers may require adopting a new approach to grain sales, as painful as it may be.  When it comes to marketing right now, “it’s not about predicting price,” Basting said. “It’s about protecting price.”

Want more insights on the January USDA reports? Watch this AgDay segment.

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