So what exactly is the trade watching before the next round of USDA reports on Tuesday, Aug. 12, 2014?
"One word: yield," says Mike North, First Capitol Ag, on the U.S. Farm Report Marketing Roundtable. "Everybody wants to know what the yield’s going to be so they know how to maneuver within the balance sheet. The reality is you have a pretty tight range on soybeans. You’re looking at 45 (bu. per acre) as roughly the average guess for yield there. Corn’s a little bit more diverse in terms of the guesses. We saw Informa come out this last week with a 168 (bu. per acre) number, which is really more of a guess on what USDA is going to say rather than what they think the crop is. As you look at the rest of the guesses out there, they’re kind of suggesting a 170 yield. Obviously if we stray too far in one direction from those numbers, ultimately you’ll see some surprises and make the market move accordingly."
When it comes to predicting numbers that might create big market movements up or down, notes Joe Vaclavik of Standard Grain, it’s instructive to recall what happened in 2012. "It was the big historic drought. It was terrible production as opposed to potentially excellent production this year," Vaclavik explains. "In that August report, USDA dropped the corn yield by more than 20 bushels an acre. That was the same day we put the high in in the market, that was the all-time high, $8.49 in December corn, so even if USDA puts out something super bearish, that doesn’t mean that the market needs to make another leg down. Maybe it spikes down and rallies back. The numbers aren’t always what they seem, essentially."
Although there’s ample evidence in the field to support talk of record production for both crops, USDA isn’t in a hurry to pin down final yield counts.
"They’re going to take more metered steps to get to that final yield, and I think we could see something more like a 168," North says. "There is a lot of talk about a 170 yield in the market, it’s already there, that’s where the average guess is, the market kind of centers around that. If we end up with a 168 on corn, I think it’s likely that we could see a little bit of a run. Let’s face it, we haven’t had a summer rally, that would be just enough cause to give the market a push."
Click the play button below to watch the complete U.S. Farm Report Marketing Roundtable, including a look at how product bans in Russia are affecting commodities, beginning at the 7:40-minute mark:
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