USDA September Crop Reports Almost Here

September 11, 2012 01:21 AM

What Traders are Talking About:

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* USDA September crop reports out Wednesday morning. USDA will issue its second survey-based estimates of the corn and soybean crops tomorrow morning. The average trade guess puts the corn crop at 10.403 billion bu. (120.6 bu. per acre yield) and the soybean crop at 2.638 billion bu. (35.5 bu. yield) -- both down from August. Any cuts to production would likely drive downward adjustments in the usage categories of the Supply & Demand tables as carryover is projected to be very tight for 2012-13. The average trade guesses look for further tightening of the corn and soybean carryover forecasts from last month.

The long and short of it: Traders are looking for bullish data from USDA. But recent price action signals traders are lightening their long exposure ahead of the reports as they hedge their bets.

* Corn harvest remains record quick. As of Sunday USDA reports 15% of the corn crop was harvested, which was slightly less than traders expected, but still record quick for this date. Given the hot and mostly dry near-term forecast and producers' desire to get the crop before Mother Nature can stake claim to more of it, strong progress is expected this week. And with the poor quality of much of the early crop being harvested, many of those bushels are going right to the elevator instead of being stored on-farm. As a result, harvest pressure is being felt. With that said, seasonal pressure is likely to be short-lived as supplies are tight and therefore there should be strong end-user demand on a price break. But the Dec./March corn spread, which was dropped dramatically since late July signals there definitely has been some demand destruction amid the historic prices.

The long and short of it: The Dec./March corn spread should give a relatively clear picture of seasonal pressure and traders' attitudes moving forward. After trading at an inverse for a long period, the spread reflects mild "carry" again.

* ABARES cuts Aussie wheat crop. Dryness in key growing regions, especially Western Australia where production is expected to fall nearly 40%, caused the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) to cut its Aussie wheat crop estimate by nearly 7% to 22.5 MMT. At that level, the ABARES production estimate is 24% below year-ago. USDA put Aussie wheat production at 26 MMT in August, but will update that forecast Wednesday.

The long and short of it: Dryness remains a concern for the Australian wheat crop moving forward as the Australian Bureau of Meteorology continues to call for the development of El Nino, which typically isn't favorable for growing conditions in Australia. But even if a strong El Nino event is avoided, the spring (our fall) outlook for Australia is drier than normal.


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