USDA's February Crop Reports: "Boring"

February 9, 2012 02:53 AM

What Traders are Talking About:

* USDA February reports lack surprises. "Boring" is the best way to describe USDA's February Supply & Demand Report. Of course, many market participants will gladly take boring over a bearish surprise that triggers panic selling, such as was seen last month. USDA cut corn carryover 45 million bu. from last month as increased exports more than offset a slightly bigger import projection. For soybeans, USDA made no changes to the supply or demand side of the balance sheet. That's actually a little negative as traders were anticipating a slight reduction in projected ending stocks. USDA cut more than expected from projected wheat carryover, but domestic ending stocks are still burdensome -- and global wheat carryover is projected to be record large. On the global front, USDA lowered its Argentina corn and soybean, and Brazilian soybean projections, although USDA remains above most private guesses for the Argentine crops.

The long and short of it: The reaction to USDA's "boring" reports will be a good gauge of overall attitudes. Traders will need to trade their feelings toward the grain and soy markets instead of reacting to USDA's numbers.

* Conab cuts soy forecast, raises corn outlook. Drought in southern states has cut soybean production potential in Brazil, while the corn crop outlook is a little better than last month as more safrinha (second crop) corn is expected to be seeded, according to the statistical agency of the Brazilian government. Conab cut its soybean crop estimate to 69.23 MMT from 71.75 MMT last month. The agency raised its corn crop estimate to 60.83 MMT -- 35.04 MMT main crop; 25.78 safrinha -- from 59.21 MMT.

The long and short of it: The official Brazilian estimate is now lower than most private forecasts for soybeans and near the top end of the guess range for corn.

* China CPI stronger than expected. China's consumer price index (CPI) rose 4.5% over year-ago in January, the first uptick in the CPI since last July. Rising food prices ahead of the Lunar New Year celebration was the reason for the uptick in consumer prices as food prices came in 10.5% over year-ago last month, while non-food prices rose 1.8%. Economists are expecting the uptick to be temporary and for the CPI to fall below 4% for the year. While consumer prices rose last month, the producer price index slipped to 0.7% above year-ago from 1.7% in December.

The long and short of it: Despite the uptick in CPI last month, China is expected to continue the pro-growth monetary policy it adopted late last year.


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