What Traders are Talking About:
* USDA slashes crop size and usage projections. USDA's initial corn and soybean crop estimates came in lower than expected at 10.779 billion bu. and 2.692 billion bu., respectively. But as a result of those crop estimates, the World Board had to aggressively lower its usage projections for the 2012-13 marketing year to keep carryover somewhat reasonable at 650 million bu. for corn and 115 million bu. for soybeans. Projected new-crop corn use was cut nearly 1.5 billion bu., while new-crop soybean use was slashed 363 million bu. from July. To justify the sharp reduction in use, USDA aggressively raised its national average on-farm cash price forecasts.
The long and short of it: Fundamentals are very bullish for both corn and soybeans. But corn has had a sell-the-fact reaction, while soybeans could only manage a mid-range close Friday and erased all of Friday's gains in overnight trade.
* Non-threatening forecast. Given the prolonged drought, it's debatable how much benefit crops will get from a period of cooler, wetter conditions, but there's no debate weather so far in August has been milder than conditions seen the two previous months. Decent rains were seen across portions of the Corn Belt this weekend, but some areas were again missed as a highly organized rain event remains elusive. This week's forecast calls for seasonal to below-normal temps with a chance of rains mid-week. The 6- to 10-day forecast from the National Weather Service calls for cool, but dry conditions as a big bubble of below-normal temps and below-normal precip is centered over the country's midsection Aug. 18-22.
The long and short of it: The non-threatening weather forecast is price-negative, especially for soybeans, to open this week.
* Ethanol mandate comes under more fire. After a group of 19 livestock and poultry groups filed an official waiver request for the corn-based ethanol mandate with the Environmental Protection Agency (EPA), the list of those seeking a reduction in the mandate is growing. Two separate calls for action have come from Congress -- one from a group of Representatives and another from a group of Senators. Add to the list the governors from Delaware and Maryland, two poultry-heavy states. And the UN Food and Agriculture Organization even entered the mix. Sources tell us that groups seeking a change in the corn ethanol mandate have a strategy whereby several additional governors will soon seek a change in the mandate. The piecemeal approach is apparently to keep the issue in the public's focus.
The long and short of it: We continue to hear EPA is unlikely to make a decision on this matter anytime soon. But given the increased pressure from many angles, EPA may have to make a decision on the corn-based ethanol mandate sooner than it had hoped.
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