Bigger Crop Estimates Are Already 'In' The Market

November 8, 2013 12:08 AM

What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn futures are fractionally to 1 cent higher, soybeans are 1 to 3 cents lower and wheat futures are narrowly mixed. Trade should remain quiet until USDA's November crop reports are released at 11 a.m. CT. Cattle futures are called lower this morning, while hog futures are expected to open with a slightly firmer tone.


* Bigger crops fully expected. USDA's November crop reports are the first official government update traders have gotten in two months. During the span, traders have had to rely on yield reports from farm country to shape their expectations of crop size. With many yields coming in "better than expected," traders are widely expecting USDA to raise its corn and soybean crop estimates this morning. Therefore, bigger crop estimates should not be a shock unless USDA's forecasts are even bigger than expected. The potentially most bearish part to this morning's data is the impact expected bigger crop estimates will have on carryover. But again, traders are expecting higher ending stocks projections from USDA, so that's already "in" the market to some degree.

The long and short of it: This could turn into a "buy-the-fact" reaction if USDA's report data isn't more bearish than expected. But it will be hard to entice a sharp, sustained rally moving forward, especially in corn, even if there's a "buy-the-fact" reaction.

* Chinese soy imports drop, but trade data upbeat. China imported 4.19 MMT of soybeans last month, according to official customs data, down 11% from September. For the first 10 months of this calendar year, China has imported 49.9 MMT of soybeans, up 3.3% from year-ago. State-run think-tank China National Grain and Oils Information Center forecasts Chinese soybean imports will total 62.5 MMT this year. Meanwhile, China's trade surplus surged to $31.1 billion in October from $15.2 billion in September and came in much higher than expected. October Chinese exports rose 5.6% while imports jumped 7.6% over year-ago.

The long and short of it: While Chinese soy imports dropped last month, the country's appetite for soybeans remains strong and is a source of support for the market. The upbeat trade data should ease concerns with recent sluggish economic data out of China.

* Brazil raises soybean, corn crop estimates. Brazilian statistical agency Conab raised its 2013-14 Brazilian soybean crop estimate to a record 87.9 MMT to 90.2 MMT from a forecast range of 87.6 MMT to 89.7 MMT in October. Conab now sees the 2013-14 Brazilian corn crop at 78.5 MMT to 79.8 MMT, up modestly from a forecast range of 78.4 MMT to 79.6 MMT last month.

The long and short of it: A higher soybean crop estimate is not a surprise, but some private forecasters have started lowering their Brazilian corn crop forecasts as they feel soybean plantings will increase more than previously thought at the expense of corn acres.


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