Expect Volatility from Grain Stocks Report

March 27, 2014 01:59 AM
Expect Volatility from Grain Stocks Report

Get ready for significant volatility following USDA’s quarterly Grain Stocks report released Monday, March 31.

"Four out of the past seven Grains Stocks reports showed limit days," says David Hightower, president and cofounder of the Hightower Report. Hightower was the commentator on a pre-report CME Group webcast.

Analysts expect March 1 quarterly grains stocks of 7.1 billion bushels, down 32% from last quarter’s 10.426 billion but 31% higher than last year’s 5.4 billion bushels. The range of estimates stretches from 6.861 billion bushels to 7.54 billion.

With the hog, cattle and dairy industries very profitable right now, Hightower expects demand for corn from the feed sector to increase.

"Corn is already cheap," Hightower says.

Allendale, a brokerage firm in McHenry, Ill., expects corn stocks of 6.995 billion bushels, which implies a 3.431 million bushel usage for the second-quarter of the marketing year, the third highest ever for that quarter.

Corn prices could drop following the report, but the long-term demand picture for corn is strong, says Hightower. The ethanol industry is making money and exports are expected to increase

"If new-crop stocks build to over 2.42 billion bushels, we will become the gas station to the world," he adds.

Bean Stocks Dwindling

Soybean prices have been nearly as volatile as corn following recent Grain Stocks reports.

"We are expecting a bullish report but the volatility could be very significant," says Hightower.

Soybeans stocks are expected to be slightly smaller than a year ago at 989 million bushels but down 54% from last quarter’s 2.148 billion. The range of estimates for soybeans stocks as of March 1 is 955 million bushels to 1.087 billion.

Last year, July soybeans spiked to $16.30 in an effort to ration demand, but planted acreage was lower last year than what analysts anticipate for this year. And South America’s soybean crop is also larger this year than last.

Allendale puts soybean stocks as of March 1 at 981 million bushels, which is just slightly lower than the average trade estimate.

Wheat stocks are also expected to drop substantially from year-ago levels. The average trade estimate for wheat stocks as of March 1 is 1.042 billion bushels, nearly 16% smaller than the previous year’s 1.235 billion bushels and 29% lower than last quarter’s 1.463 billion. The range of estimates for wheat stocks as of March 1 is 985 million bushels to 1.115 billion.

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