Runup Into USDA's April Crop Reports

April 9, 2014 01:11 AM

What Traders are Talking About:

Overnight highlights: As of 6:10 a.m. CT, corn futures are mixed with old-crop contracts 1 to 2 cents higher and new-crop contracts 2 to 3 cents lower, soybean futures are 7 to 12 cents higher in old-crop contracts and 2 to 4 cents higher in new-crop contracts, while wheat futures are 3 to 7 cents higher in most contracts. Cattle futures are mixed and hog futures are under pressure.


* Runup ahead of USDA's reports. May soybean futures have moved to a new contract high, while November soybeans, May corn and December corn futures are trading at their highest levels since last September. The price strength into the April crop reports comes amid expectations USDA will lower its 2013-14 ending stocks forecasts for both corn and soybeans. But it also signals there's little concern with carrying long positions into the reports, which is an indication attitudes are bullish. The question now is whether USDA's data is friendly enough to build buying interest.

The long and short of it: The runup into USDA's report lowers the odds of a bullish price response. But the fact the March 31 reports didn't produce a reversal of price trend suggests corn and soybeans should continue higher near-term unless there's an unexpected bearish surprise from USDA.

* Winter wheat crop ratings plunge. USDA's first national winter wheat crop condition update of the spring reflected major declines in the condition of the crop, as expected. USDA now rates 29% of winter wheat as "poor" to "very poor," versus 8% in these categories in the final update last fall. USDA rated 62% of the crop as "good" to "excellent" before it entered dormancy and now just 35% of the crop is rated in the top two categories. When USDA's crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500 point scale), the HRW crop plunged 64 points from last fall to 299, while the SRW crop fell 30 points to 348. Last year at this time the CCI ratings were 274 for HRW and 371 for SRW. The first spring CCI ratings last year (as of March 31) were 277 for HRW and 362 for SRW.

The long and short of it: While there have been multiple rain events in the Plains already this spring, the rains have missed the driest areas and the crop continues to go backward. As a result, traders are starting to rebuild some of the premium they had been removing since March 20.

* Heavy rains deluge Argentina. Heavy late-season rains have pounded Argentina over the past week, with the heaviest hit areas receiving 6 to 14 inches. Needless to say, harvest efforts have been halted. Pro Farmer South American consultant Dr. Michael Cordonnier says some of the country's soybean crop will be lost to the deluge of rain, possibly up to 1 MMT. Meanwhile, union workers around Rosario, Argentina's main grain export hub, are planning a one-day strike Thursday over wages. While this is a "normal" strike for this time of year in Argentina, it could blow up into something more significant.

The long and short of it: The Argentine situation is adding to already bullish attitudes in the soybean market. If the port strike blow ups, it would be really price-supportive.


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