USDA Report Day -- A Look Ahead

March 10, 2014 12:48 AM

What Traders are Talking About:

Overnight highlights: As of 5:45 a.m. CT, corn futures are trading 5 to 8 cents lower, soybeans are 3 to 8 cents lower in old-crop contracts and 1 to 2 cents lower in new-crop contracts, while wheat futures are mostly 6 to 9 cents lower. Cattle futures are mildly firmer in light electronic trade, while hogs are mixed.


* USDA report day -- a look ahead. With soybean export bookings running 7% above USDA's forecast, traders are expecting USDA to raise its soybean export projection and trim its old-crop carryover figure in the Supply & Demand Report. There are no sure bets when it comes to USDA reports, but a bigger export projection is about as close as it gets. But it wouldn't surprise me to see USDA reduce residual "use" by the amount of the increase in exports and leave carryover virtually unchanged. Corn and wheat ending stocks projections are expected to tick up slightly from last month. I expect a bigger corn export forecast from USDA, but for that to be more than offset by a reduction to feed and residual use.

The long and short of it: If USDA leaves old-crop bean carryover at 150 million bu., it would likely draw a temporary price-negative reaction even though stocks are relatively tight at that level.

* Chinese soybean imports drop, but remain strong. China imported 4.81 MMT of soybeans, which was just slightly lower than forecasts of around 5 MMT. February soybean imports were down 18.6% from January, but 65.9% greater than year-ago. Two months into 2014, Chinese soybean imports of 10.72 MMT are up 40.1% from year-ago. Seasonally, Chinese soybean imports are expected to slow into spring, especially with reports of supplies being backed up at ports amid slowed demand for meal due to bird flu.

The long and short of it: Through February, China continued to get virtually all of its soybean imports from the United States. With Brazilian exports picking up, the U.S. share of Chinese demand will slow seasonally, but export data signals China continues to buy and take delivery of old-crop U.S. soybeans.

* Concerning Chinese trade data, but tame inflation. China unexpectedly posted a trade deficit of $23 billion in February. Traders were expecting a trade surplus of $14.5 billion. Exports plunged 18.1% last month, while imports rose 10.1%. The sharp drop in trade data raises some red flags about the health of the Chinese economy. One factor China doesn't have to worry about is inflation. The February consumer price index (CPI) came in 2% above year-ago, which was right in line with expectations and the slowest pace of gain in 13 months. Food prices rose 2.7% over year-ago last month, while non-food prices firmed 1.6%.

The long and short of it: The very disappointing trade data is raising concerns about the health of China's economy, especially the export figure as so much of China's economy is built on exports. Meanwhile, the tame inflation data gives China leeway to enact measures to boost growth.


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