Some Surprises Are Likely In January Crop Reports

January 10, 2013 11:48 PM

What Traders are Talking About:

* January crop reports out today. USDA will release its Supply & Demand Report, Annual Production Summary, Quarterly Grain Stocks Report and Winter Wheat Seedings at 11 a.m. CT. Markets have been relatively quiet ahead of the barrage of reports as traders have been unwilling to add new positions on either side of the market. Due to the sheer volume of data which will be released, there are bound to be some surprises. Key will be whether the surprises are in the numbers that have the most market-moving capability, i.e., corn and soybean data.

The long and short of it: Recent history suggests the Dec. 1 corn stocks figure today.

* Chinese inflation accelerates. China's consumer price index (CPI) rose more than anticipated to 2.5% above year-ago in December, which was a seven-month high and a half point above the November CPI reading. Rising food prices accounted for most of the increase as food prices were 4.2% higher than year-ago, while non-food prices were 1.7% higher. China's CPI for 2012 was 2.6% higher than 2011. Meanwhile, the producer price index declined 1.9% last month.

The long and short of it: Accelerating inflation likely ends any chance the Peoples Bank of China will further ease monetary policy through lower interest rates or reduced bank reserve requirements. But Chinese inflation is not strong enough to be a concern at this stage.

* End-user reaction key. There has been a pickup in end-user buying ahead of USDA's January crop reports, although much of the business has been small purchases. South Korea has been the most active with corn and wheat purchases. China and "unknown" have purchased some soybeans. But it's end-users' reaction to USDA's report data today which is the key on the demand front moving forward. A rush to buy following today would suggest end-users feel short-term lows are in place. But if end-user demand is limited, it would signal they sense more near-term price pressure is coming.

The long and short of it: Markets need a flurry of fresh demand news to put in short-term lows. While there's been mild buying ahead of USDA's reports, it hasn't been strong enough to suggest prices have fallen far enough.


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