Grain Markets Keep Reports in Crosshairs

January 10, 2012 08:07 PM

Tomorrow we’ll know exactly how these reports will rock the markets. Here are some expert expectations.

For the last few months, the date Jan. 12 has been part of nearly every grain marketing discussion. On that day, USDA will release the final corn, soybean and cotton production numbers as well as the quarterly Grain Stocks report.
Experts agree, this report will have market implications for the next several months, and definitely until the March 30 Prospective Plantings report.
“The USDA reports on Jan. 12 will set the stage for the first quarter of trade in 2012,” says Dustin Johnson, a broker with EHedger. “Obviously everyone has been talking about the significance of the January reports, and the massive swings they have caused over the past few years.”
Pete Meyer, market analysis and author of the Opening Print blog, echoes this sentiment. “I think the January WASDE will definitely set the tone for 2012, but also has the chance to ‘print the high price’ for a while.”

A Bullish or Bearish Report?

Naomi Blohm, market advisor with Stewart-Peterson, says if USDA throws us a bullish report, the marketplace will electrify. “Every story coming over the newswire will be construed as more and more bullish, and $8 corn will be the talk at every farmer’s coffee nook across the Midwest. The farmer won’t have a need to caffeinate with coffee; the adrenaline rush of a bullish report should leave them zinged up for weeks.”
She says if there is a surprise bearish tone in the report, futures prices will drop .50 to 1.00 easily. “Then trade will focus on weather in South America and twiddle their thumbs until planting season begins here in the U.S.”
Johnson agrees that South American weather is still a key market driver. “The market will decide how important the South American production will be for the global balance sheet.”

A Clear Scope of Demand

The number to watch will be corn ending stocks, says Blohm. “The question will be, ‘Did they cut the corn carry out number as expected?’”
She says the industry is looking for corn for ethanol demand to have remained solid, if not surpassed demand expectations. “With exports solid, ending stocks should be down.”
Meyer says a lower number than 9.3 billion bushels would imply more demand or bring into question the big gain in stocks from the last report.”
Allendale Inc. recently released their WASDE expectations. They are expecting lower ending stocks due to a moderate increase in feed demand.

Below are the yield expectations (per acre or pounds) for Thursday's reports:

  Corn Yield Soybean Yield Cotton Yield
EHedger 146.7 41.3 794
Opening Print 145.1 41.7 (N/A)
Allendale 146.51 41.38 (N/A)
Stewart-Peterson 146 41.3 (N/A)
USDA (Dec. 1) 146.66 41.34 771


Impact on Prices

Mike Hogan, manager of Stewart-Peterson’s Market360 consulting service, says the reaction to the report is much more important than the report itself.

“Be prepared for dramatic up or down scenarios. Corn could literally have a price range between $3.50 and $11.00 this year and beans could be between $7.50 and $16.00 this year.”
He adds another important market to watch this week will be the U.S. dollar. "Right now the dollar is winning the currency beauty contest by being the least ugly contestant. It has recently done some impressive technical moves higher. Barring intervention from the U.S. Fed, the Dollar may have seen its low for several years to come, which is a net negative to commodity prices in general."
He says a higher dollar likely scares important long-term speculative investors away. "It could be the biggest price determent and recently it seems to be forgotten."


For More Information
Read more commentary in the following blogs from these market experts and their companies:

Opening Print by Peter Meyer

The Allendale Wake-Up Call by Paul Georgy

EHedger Report by Justin Kelly

Marketing Strategy by Scott Stewart


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