Corn Stocks Confusion The Focus At USDA's Data Users' Meeting

October 23, 2012 01:40 AM

What Traders are Talking About:

* Corn stocks all the talk. The dramatic difference between 2011-12 corn ending stocks reported in the September Supply & Demand (S&D) Report and Sept. 1 stocks reported in the Quarterly Grain Stocks Report just over two weeks later was the primary focus on day one of USDA's data users' meeting in Chicago Tuesday. On Sept. 12 in the S&D Report, the World Board estimated 2011-12 corn ending stocks at 1.181 billion bu., but on Sept. 28 in the Quarterly Grain Stocks Report, NASS estimated Sept. 1 corn stocks at 988 million bushels. Of the discrepancy, Gerry Bange, head of the World Board says, "We want to do better. We have no reason to have any kind of a disagreement with the NASS numbers." USDA officials acknowledge the early harvesting of corn makes it difficult to separate old-crop from new-crop supplies when gathering survey data for Sept. 1 stocks, but say moving the start of the marketing year to Aug. 1 is not feasible due to monetary constraints.

The long and short of it: No hard answers are going to come from the data users' meeting, but it is a time when USDA officials can sit down to address questions and concerns of market participants and industry analysts.

* Record September pork stocks. Traders were expecting frozen pork stocks as of Sept. 30 to be record large, but they came in even higher than anticipated at 630.657 million pounds. That represents an 8% increase from last month and is 28% higher than last year at this time. Record feed prices this summer led to very aggressive marketing of hogs, which resulted in the record buildup in frozen pork supplies. Meanwhile, beef stocks at the end of September totaled 425.621 million lbs., which was about 2 million lbs. above the average pre-report guess and down 2% from last month and 0.5% below year-ago.

The long and short of it: Hog traders have been sensing a short-term top is close. The pork stocks data may be what ends the impressive contra-seasonal rally.

* EU Commission backs financial transaction tax. The European Commission says it backs a plan by 10 euro-zone countries to introduce a financial transaction tax that would allow the entire European Union to contribute to the costs of the sovereign debt crisis. In June, the plan failed to gain unanimous approval of the 27-nation bloc, but the initiative can be implemented if at least nine countries back it. The 10 countries supporting the plan are France, Germany, Austria, Belgium, Greece, Italy, Portugal, Slovakia, Slovenia and Spain. The president of the European Commission says, "This tax can raise billions of euros of much-needed revenue for member states in these difficult times. This is about fairness: we need to ensure the costs of the crisis are shared by the financial sector instead of shouldered by ordinary citizens."

The long and short of it: While such a plan would be a step in the right direction, Europe's problems are too far-reaching for a single step such as this to be the "cure." More cooperative efforts are needed to get the region out of its debt/financial crisis.


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