USDA Comes With Another 'September Surprise'

September 28, 2012 03:20 AM

What Traders are Talking About:

* Another 'September surprise' from USDA. USDA's Sept. 1 corn stocks came in 138 million bu. below the average pre-report guess at 988 million bu. despite record corn harvest which should have made more new-crop corn available to be counted as old-crop stocks as of Sept. 1. And corn futures have had a bullish reaction to the supportive data, rallying sharply immediately after the report was released. Sept. 1 soybean stocks came in 37 million bu. higher than anticipated at 169 million bushels. Sept. 1 wheat stocks were 177 million bu. less than the average pre-report trade guess. USDA's final 2012-crop all wheat estimate was right in line with expectations, although the SRW estimate was less than anticipated and the spring wheat crop peg came in higher than expected.

The long and short of it: As expected, USDA's Sept. 1 corn stocks figure was the headliner, although surprisingly (at least to me) that it was much lower than anticipated as opposed to higher than expected. With the bullish surprise now, it would suggest USDA's Dec. 1 corn stocks figure may be surprisingly bearish.

* China buying soybeans. There's chatter China may have bought 10-plus cargoes of soybeans this week, although there has been official confirmation on only five cargoes. Yesterday, USDA confirmed China bought 110,000 MT of U.S. soybeans for 2012-13 and this morning USDA reported daily export sales of 180,000 MT of soybeans to China. Another 140,000 MT of U.S. soybeans were sold to "unknown" on Wednesday. Export business so far has been more active on corn, where South Korean feedmakers have been very active buyers this week. Countering this, however, was the 750,000 MT of deals for Brazilian corn three U.S. livestock and poultry groups in North Carolina confirmed, which I wrote about yesterday. Wheat is also seeing a little export business trickle in on the price drop, although the bulk of the wheat business continues to go to countries besides the United States.

The long and short of it: As I previously said, end-users will tell the market when prices have fallen "far enough." Those signals are starting to be seen. But speculative money must flow into the long side of the grain and soy markets again before futures bottom.

* Don't forget about H&P Report. USDA's Quarterly Grain Stocks Report has gotten nearly all of traders' attention. But the Quarterly Hogs & Pigs (H&P) Report out this afternoon may end up being the most important data released today. After all, it will give us some key numbers that will pertain to end-user demand for both corn and soybean meal down the road. And demand is the real key to the price outlook for corn and soy futures because we already know supplies will be tight through the 2012-13 marketing year. It's expected that summer farrowings and fall/winter farrowing intentions will come in lower than year-ago, a reflection of historically high feed prices. But while summer farrowings are done, producers' intentions this fall can, and very likely will, change.

The long and short of it: Given the sharp break in feed prices since the all-time highs this summer -- and since USDA's H&P Report survey was completed -- it's entirely possible, the fall and winter farrowing intentions reported today will be lower than what's likely to be seen.


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