USDA Delivers Bearish January Crop Reports

January 12, 2012 02:53 AM

What Traders are Talking About:

* USDA's January reports bearish. It's hard to find a positive (or even neutral) number in USDA's barrage of January report data. The most damaging figure for corn is Dec. 1 stocks, which came in 241 million bu. above the average trade guess. For beans, the most damaging number is projected 2011-12 carryover at 275 million bushels. Not only did that come in well above the average trade guess, but it signals there is no shortage of soybeans. For wheat, winter wheat seedings topped trade expectations by around 900,000 acres.

The long and short of it: Based on the widespread negative news across the data, it appears very likely this will mark the sixth January crop reports in a row to trigger a sharp market price response. The bearish data will make it very difficult for bulls to get near-term traction.

* Rains move into southern Brazil. Beneficial rains were seen Tuesday and Wednesday across much of Argentina, although some areas like La Pampa had disappointing rainfall totals. While the rains will provide temporary relief, a return of hot and dry conditions is expected by late in the weekend. The rains pushed into southern Brazil late yesterday and are forecast to continue today -- and may linger in some areas Friday. Like in Argentina, the rains are expected to provide temporary relief, with dry weather and above-normal temps expected to return by early next week.

The long and short of it: The rains will provide temporary relief, especially for the soybean crop. Rain chances appear very limited over the next week, although weather models suggest another rain event could develop by Jan. 21-22.

* Euro-zone update. The European Central Bank (ECB) and Bank of England both held interest rates unchanged following monetary policy setting meetings. The ECB paused after consecutive rate cuts to start the Mario Draghi regime. Meanwhile, both Spain and Italy had successful bond auctions in their first debt selling of the new year. Demand was good, especially for the Spanish auction, and yields dropped sharply in both countries.

The long and short of it: The euro was supported and the U.S. dollar was pressured by overnight happenings in Europe. At least for today, investors have a little stronger risk appetite.


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