USDA Expected To Trim Domestic Carryovers

February 10, 2014 12:01 AM

What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn futures are trading 1 to 2 cents lower, soybeans are around 2 cents higher in old-crop contracts and 4 to 5 cents higher in new-crop contracts, while wheat futures are 2 to 4 cents lower. Pre-report trade is likely to keep action rather calm ahead of USDA's Supply & Demand Report. USDA's data will direct price action after 11 a.m. CT. Cattle and hog futures were lightly traded overnight and are likely to be mixed this morning.


* USDA Feb. S&D Report out this morning. The export pace for all corn, soybeans and wheat is running above to well above the "required" pace. Therefore, traders are expecting higher export forecasts for all three, which would trim USDA's carryover projections. On the global front, traders are focused on adjustments to world production forecasts, especially South American soybean and corn forecasts. The world wheat ending stocks forecast will be another reminder of plentiful supplies.

The long and short of it: Corn and wheat need bullish data to build on recent corrective price strength. If soybeans don't get a cut to domestic carryover or if the price response to an expected cut isn't positive, it would signal buying interest has again stalled at the top of the extended, choppy trading range.

* Weather negative for wheat, supportive for soybeans. Forecasts call for precip across parts of the Plains and Midwest this week, which would be beneficial for the winter wheat crop. Key is whether the moisture extends into the Southern Plains, where moisture is most needed. Meanwhile, hot, dry weather is forecast to continue across southern Brazil, threatening to further stress the soybean crop there.

The long and short of it: While this week's forecast precip won't "make" or "save" the winter wheat crop, but it is price-negative. Brazil is going to grow a record soybean crop this year, even if late-season weather trims production, but the hot, dry forecast is mildly price-supportive for beans. For soybean futures to push above the top of the extended, choppy range, weather concerns must continue to build.

* NCC: Cotton plantings to rise. The National Cotton Council's (NCC) annual producer survey signals cotton plantings will rise 8.2% from year-ago to 11.261 million acres. Producers plan to plant more acres to cotton amid the drop in row crop prices, especially corn. NCC assumes a national average yield of 819 lbs. per acre, which would push production to 16.37 million bales. On the global scene, NCC expects Chinese cotton imports to fall to a 12-year low of 6.32 million bales in 2014-15, down 43% from its forecast for the current marketing year.

The long and short of it: A rise in cotton acres is fully expected and therefore, NCC's survey came as no surprise to the market.


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