Negative Reaction To USDA November Crop Reports

November 9, 2012 02:25 AM

What Traders are Talking About:

* Negative price reaction to USDA's reports. USDA raised its soybean crop estimate more than anticipated to 2.971 billion bu., with the national average yield increasing 1.5 bu. per acre to 39.3 bushels. USDA's corn yield estimate was also increased from last month, with the new peg at 10.725 billion bu. on a national average yield of 122.3 bu. per acre. Traders were anticipating a slight reduction in the size of the corn crop. USDA increased projected ending stocks for corn, soybeans and wheat, although all three came in slightly higher than expected. Carryover is now projected at 647 million bu. for corn, 140 million bu. for soybeans and 704 million bu. for wheat. On the global scene, USDA increased 2012-13 projected ending stocks by 720,000 MT for corn, 2.46 MMT for soybeans and 1.18 MMT for wheat.

The long and short of it: The price reaction has been negative, with the biggest move down in soybeans. Corn is trading just below unchanged, although that's mostly due to spillover from soybeans. But while the price reaction is negative this morning, overall fundamentals remain bullish.

* Japan buying U.S. corn. Japan has been a selective buyer of U.S. corn the past several months due to high prices, instead opting to seek alternative sources for feed needs. But major congestion at Brazilian ports has caused shipping delays on 900,000 MT of corn destined for Japan, causing Japanese buyers to turn to U.S. corn again. Exporters tell Dow Jones newswire Japanese buyers have purchased at least 500,000 MT of U.S. corn for January to March shipment. Japan also recently purchased a cargo of 21,200 MT of U.S. feed barley -- the country's first purchase of U.S. feed barley in two years.

The long and short of it: Given tight global supplies, importers have little choice but to turn to U.S. corn -- no matter the price -- to fill needs if there are any problems with supplies sourced from other countries.

* Chinese inflation eases, economic activity picks up. China's consumer price index (CPI) declined to 1.7% above year-ago in October, down from a 1.9% increase in September. Food prices last month came in 1.8% higher than year-ago, while non-food prices were 1.7% higher. Meanwhile, industrial output, retail sales and exports all expanded more than expected last month, suggesting China's efforts to boost economic activity through monetary policy easing are taking hold. The data also signals China's economy has weathered the storm and is showing no signs of a hard landing.

The long and short of it: Declining inflationary pressure gives the People's Bank of China the leeway to further ease monetary policy to boost economic activity. But with data signaling economic activity is on the rise, China is not expected to further ease monetary policy at this time.


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