March 30 USDA Report Data: Mostly Bullish

March 30, 2012 03:51 AM

What Traders are Talking About:

* USDA report data: mostly bullish. USDA's survey work indicates producers plan to seed 95.864 million acres to corn and 73.902 million acres to soybeans this year. The corn number was above the top end of the guess range, while the soybean number was below the bottom end of the guess range. In my opinion, that will be the lowest soybean planted acreage figure of the year and it's fairly safe to say that will be the highest corn planted acreage figure. To offset the bearish acreage number for corn, USDA pegged corn stocks as of March 1 at 6.01 million bu., which was 150 million bu. less than traders expected and implies record use in the December-February period (second quarter of the 2011-12 marketing year). Soybean stocks were about as expected at 1.37 billion bushels. Wheat planting intentions (all wheat and spring wheat) came in lower than expected and March 1 wheat stocks were just slighlty below the average pre-report guess.

The long and short of it: Aside from the corn acreage figure, USDA's numbers are bullish. Given that markets faced pressure ahead of the USDA data -- heavy pressure in the corn and wheat markets -- a strong price reaction is likely. And soybeans are likely to lead the move higher.

* China soybean imports to 'increase significantly' in coming months. Chinese soybean imports are forecast to rise to 58 MMT this year, an 8.9% increase from last year, according to China National Grain and Oils Information Center (CNGOIC). The state-run firm says increased crushing capacity and larger government purchases for state-owned reserves are the reasons for the sharp increase. CNGOIC expects imports to "increase significantly" in the coming months as processors have only 20% to 30% of needs booked for July through October.

The long and short of it: Typically, South American soybeans would account for the bulk of Chinese purchases for summer and early fall delivery. But given reduced South American production, Chinese buyers may turn more to U.S. soybeans this year.

* Funds continue to aggressively sell corn. Funds sold 56,000 contracts (280 million bu.) of corn the first four days this week amid active liquidation ahead of USDA's Prospective Plantings and Quarterly Grain Stocks Reports. But the aggressive liquidation also came at the end of the first quarter, so it could have included some "window dressing." Given the sharp selloff ahead of USDA's reports and to close out the quarter, fund activity will be watched closely today (after the reports) and early next week (to start the new quarter) to see if they remain active sellers or start to move money back into the long side of the market.

The long and short of it: Fund activity the next several trading sessions could be very telling for price direction through spring.


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