Corn Holds Report Surprise

May 12, 2009 07:00 PM
 

Julianne Johnston Pro Farmer Senior Markets Editor


From Pro Farmer

USDA trimmed corn carryover more than expected... The "market friendly" report surprise in the May S&D Report was for the corn market. At 1.6 million bu., old-crop carryover was trimmed 100 million bu., which traders expected USDA to raise carryover slightly. New-crop carryover, at 1.145 million bu., also came in below expectations, signaling supplies could tighten more than traders previously thought for the upcoming season. Even more, with planting delays getting serious in the eastern Corn Belt, some traders are also talking about the prospect of new-crop corn carryover coming down even more as some acres will likely shift to soybeans.

2008-09

USDA

Avg.

Range

USDA April

2007/08

in billion bushels

Corn

1.600

1.711

1.645-1.879

1.700

1.624

Soybeans

0.130

0.130

0.086-0.148

0.165

0.205

Wheat

0.669

0.687

0.655-0.700

0.696

0.306

Traders did an excellent job of anticipating the slashing of old-crop soybean carryover to 130 million bu., as that figure hit the target for the average trade guess. New-crop carryover at 230 million bu. came in slightly below the average trade guess, but traders believe USDA's acreage figure will likely be revised upward in the June report, raising carryover, as well.

2009-10 carryover

USDA

Avg.

Range

in billion bushels

Corn

1.145

1.383

1.129-1.720

Soybeans

0.230

0.239

0.148-0.528

Wheat

0.637

0.653

0.570-0.742

The data was positive for the wheat market, as both old- and new-crop carryover estimates came in below traders' expectations. The winter wheat production estimate of 1.502 billion bu. also came in below traders' expectations, which was also helped to lift wheat futures yesterday.


Opening calls. These calls originate more than three hours before the open -- use caution, things change:

Corn: 5 to 7 cents higher. Futures saw spillover gains in overnight trade. Futures gapped higher on the open based on USDA's tighter-than-expected old- and new-crop corn carryover estimates. Corn closed 6 to 8 cents higher.   July corn gapped higher on the open and briefly moved above the $4.30 level, leaving a 5 1/4 cent gap open.

Soybeans: 11 to 15 cents higher. Futures were higher overnight on help from strength in crude oil. Nearbys closed firmer yesterday, while deferreds finished slightly lower amid spreading. Traders started yesterday's session by unwinding bull spreads in corrective trade. By the close, however, bull spreading was the featured activity again. Tightening old-crop stocks and strong demand remain the key fundamental in soybeans.

Wheat: 3 to 7 cents higher. Futures saw spillover in overnight trade from yesterday's gains. Futures closed 2 to 3 cents higher in Chicago yesterday, supported by USDA's reports, although saw two-sided trade. Now that July Chicago wheat futures have inched above the April high at $5.84 1/2, that level is key support on a closing basis. A close back below that level would open risk to the March and April lows from $5.12 1/2 to $5.10 3/4.


Cash cattle expectations: Watching beef market. The beef market improved on Monday's performance as prices were 60 to 99 cents higher on movement of 268 loads Tuesday. If the beef market continues to strengthen, it would trigger more talk of a short-term fundamental low in the cattle market.

Futures call: Mixed. Futures are called to open mixed as traders wait on clearer direction from the cash market. Yesterday live cattle futures capped off a choppy day of trade by closing mixed. June live cattle gapped slightly higher on the open, but filled the gap. The low-range close opens the door to spillover pressure this morning.

Cash hog expectations: Steady to higher. After a 32-cent decline Monday, the pork market recovered by rising $1.14 Tuesday on movement of 100.1 total loads. With the strength in the pork market, packer demand for hogs will remain strong. Packers are competing for a declining supply of market-ready hogs.

Futures call: Mixed. Futures are called to open mixed amid spreading. Futures closed firmer yesterday, which could lead to spillover support, however. June lean hog futures entered the big April 27 downside price gap, which was the initial reaction to the H1N1 outbreak. Filling that gap at $71.50 is needed to confirm a major low has been posted and signal market concerns with the H1N1 situation are in the past.


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