Traders Expecting Bigger USDA Crop Estimates Friday

November 4, 2013 12:13 AM

What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn futures are narrowly mixed with an upside bias, November soybean futures are steady while deferred months are 5 to 6 cents higher and wheat futures are fractionally to 3 cents higher. The upside is limited to short-covering, which means it may be hard to sustain the mild overnight gains. Cattle futures are expected to open with a mixed tone while hogs are called steady to slightly higher.


* Traders expecting bigger crop estimates. USDA will release its first corn and soybean crop estimates since September on Friday -- the October crop reports were canceled due to the government shutdown. Traders are looking for USDA to raise its corn and soybean crop pegs from the September estimates as yields have generally been coming in stronger than expected. Private firms Informa Economics and FC Stone both raised their crop estimates last Friday. Informa reportedly now sees the corn crop at 14.223 billion bu. (161.2 bu. per acre yield) and the bean crop at 3.298 billion bu. (43.3 bu. yield). That's up from the firm's previous estimates of 14.010 billion bu. (158.8 bu. yield) and 3.176 billion bu. (41.7 bu. yield). FC Stone reportedly pegs the corn crop at 14.367 billion bu. (161.2 bu. yield) and the soybean crop at 3.27 billion bu. (42.8 bu. yield). That's up from the firm's previous estimates of 14.150 billion bu. (158.7 bu. yield) and 3.163 billion bu. (41.4 bu. yield). In September, USDA pegged the corn crop at 13.843 billion bu. (155.3 bu. yield) and the soybean crop at 3.149 billion bu. (41.2 bu. yield).

The long and short of it: Fear of big crop estimates from USDA on Friday is pressuring corn and soybean futures and limits buying interest to mild short-covering.

* South American growing season off to favorable start. South America is experiencing favorable weather to start the 2013-14 growing season. Wetter areas of southern Brazil are in line for warmer, drier weather this week, which will allow producers to get into fields and will promote growth for recently planted crops. Meanwhile, central Brazil is in line for needed rains later this week. Argentina is also expected to receive rains later this week following heavy rains late last week. The rains will mean there is now plentiful soil moisture for producers to rapidly advance planting efforts once they can get back into fields.

The long and short of it: Traders are expecting another year of record soybean production in South America, which limits upside potential in soybean futures without fresh bullish demand news.

* China's manufacturing sector continues to expand. China's official purchasing manufacturing index (PMI) rose to an 18-month high of 51.4 in October from 51.1 in September, according to China's National Bureau of Statistics. That marked the fourth consecutive month of higher PMI readings. Meanwhile, private firm HSBC pegged China's October PMI at 50.9 versus 50.2 in September.

The long and short of it: Expansion of China's vast manufacturing sector is favorable for raw commodity demand, though investors don't currently have a bullish attitude toward the commodity sector.


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