USDA Provides Plenty of 'Surprises'

January 12, 2009 06:00 PM
 

Julianne Johnston Pro Farmer Senior Markets Editor


From Pro Farmer

Updated as of 7:00 a.m. CT

USDA provides markets with plenty of surprises... Traders viewed yesterday's USDA reports as bearish for corn and soybeans, while saying the wheat data was neutral. USDA provided both bullish and bearish data for wheat, but signals carryover for the next marketing year could tighten as winter wheat seedings estimate came in below expectations. Grain futures closed sharply lower on the data, with corn limit lower. Additional pressure came from strength in the dollar and weakness in crude oil. Following are additional report highlights:

Soybeans: USDA raised the size of the 2008 soybean crop more than expected to 2.959 billion bu. and increased 2008-09 carryover by 20 million bu. to 225 million bushels. USDA also pegged Dec. 1 soybean stocks at 2.276 billion bu., which was higher than expected. The end result was a very negative price response that leaves the market vulnerable to followthrough selling overnight. The bearish report data shifted traders focus from South American weather conditions, which are forecast to remain hot and dry this week, especially in Argentina. USDA left their Brazilian production estimate unchanged at 59 MMT, but lowered Argentine production 1 MMT to 49.5 MMT. USDA lowered their 2008-09 global carryover estimate 250,000 MT from last month to 53.94 MMT, which represents about 90% of a Brazilian crop.

Corn: USDA raised the size of the 2008 crop more than expected to 12.101 billion bushels. The Grain Stocks Report showed corn stocks of 10.084 billion bu., which was also above expectations and reflected a slower-than-expected usage pace. As a result, USDA lowered usage figures in their Supply & Demand Report, with carryover now estimated at 1.79 billion bushels. Traders now view stocks as ample, especially given slumping demand, which reduces (for now) their concern about 2009 acreage. USDA boosted global carryover 12.2 MMT from last month to 136.03 MMT. With stocks estimates on the rise amid slumping world consumption, there isn't a supply concern on the global front either.

Wheat: USDA delivered both bearish and bullish data. The Grain Stocks Report showed Dec. 1 stocks at 1.422 billion bu., which was above expectations. USDA also raised carryover 32 million bu. from last month to 655 million bu., which is more than double year-ago levels. However, USDA delivered a much-smaller-than- expected winter wheat seedings estimate of 42.098 million acres, which is down around 4 million acres from year-ago levels. As a result, traders will be paying more attention to weather conditions in the Plains, as well as spring wheat acreage prospects. USDA also raised global stocks around 1 MMT from last month to 148.36 MMT. After very tight world supplies last year, there is no shortage of wheat this year.

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Opening calls. These calls originate more than three hours before the open -- use caution, things change:

Corn: 7 to 9 cents lower. Futures were weaker in overnight trade on spillover from yesterday's losses. Futures posted limit losses (30 cents lower) in all but extreme far-deferred contracts yesterday in reaction to USDA data and outside markets. March corn futures stopped shy of the 40-day Moving Average thanks to the daily trading limit. Violation of that support at $3.79 3/4 today and the mid-December reaction low at $3.70 1/4 would signal a short-term top has been posted and leave the contract low at $3.05 1/2 as the next level of strong support on the daily chart.

Soybeans: 2 to 4 cents higher. Futures saw light short-covering support overnight. Futures closed sharply lower to down the full 70 cent daily limit yesterday. Meal and soyoil also posted very sharp losses. Pressure came from bearish USDA data and broad-based commodity selling. March soybean futures closed right on the uptrend from the Dec. 5 low. Followthrough pressure Tuesday would violate the uptrend, which could trigger a fresh wave of chart-based selling.

Wheat: 1 to 2 cents lower. Futures saw light spillover pressure in overnight trade. Futures closed near limit down at all three exchanges on heavy spillover from neighboring pits and the commodity world in general yesterday. March Chicago wheat futures violated uptrending support from the Dec. 5 low. That leaves the 40-day Moving Average (at $5.57 1/4 Monday) as key near-term support. A drop through that level would leave $5.18 and the contract low at $4.71 as the only strong support on the daily chart.


Cash cattle expectations: Watching beef market. Boxed beef prices were $1.71 (Select) to $2.12 (Choice) higher Monday on movement of 261 loads. That's a good start for the beef market, but the product market must continue to strengthen if packers are going to raise cash cattle bids in the Plains. Cash sources expect showlist numbers to be slightly larger than week-ago.

Futures call: Steady to weaker. Futures closed with slight losses following a choppy day of trade yesterday. Live cattle futures showed a choppy tone through much of the morning. But widespread weakness across the commodity sector caused a slightly lower close as futures finished low-range in most contracts. That opens the door to followthrough selling this morning.

Cash hog expectations: Steady to firmer. Cash hog bids are expected to trade steady to higher across the Midwest today as packers work to fill up slaughter runs. But snow-covered roads, high winds and bitterly cold temps could slow hog movement in some areas and cause packers to focus on improving razor-thin cutting margins.

Futures call: Weaker. Futures closed moderately to sharply lower yesterday, which was in the lower end of the day's range for most contracts. Lean hog futures were pressured by heavy selling in the commodity world, especially the corn and meal markets. The big premium futures hold to the cash index also weighed on futures. With the low-range close, futures are susceptible to followthrough selling this morning.


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