Grains finished mixed with May corn down 3 ¼ cents, May beans up 11 ¾ cents, and May wheat down 4 ½ cents.
The USDA Supply and Demand report will be released tomorrow morning at 7:30 am. The market has been pricing in a large reduction to South American corn and soybean production. Tomorrow’s report will confirm if the USDA is seeing the same problems. We also have to take into account that the export sales have been running behind pace from the current USDA estimates which may result in the USDA lowering their expected export demand for soybeans.
So who is buying beans? If you look at the Commitment of Traders data, we see that the "managed money" was net long about 33,020 contracts of soybeans on January 3rd. Currently they are sitting with a net long position of 117,678 contracts which is an 84,658 net contract increase in less than 2 months! We don’t see the old crop bean supply as a big problem at this time and think that the market will have to see a major increase in demand to get old crop supply down to the carryout levels that many people are suggesting. For downside protection, bean volatility is very low (relatively speaking) and buying May soybean puts could turn out to be a good play.
May wheat dropped back below the price of May corn and is one more fundamental attribute that could force more downside pressure on old crop corn. March corn is still trading at a premium to May corn and May-Dec corn spreads are still way overpriced in my opinion. We look for the USDA to shed some more light on the supply situation. I would guess that the most likely place for surprises on the USDA Supply and Demand report will be in old crop soybean carryout for US and World. Currently the market is estimating old crop soybean carryout at 257 million and old crop corn carryout at 784 million. To see the rest of the market estimates, please see the chart below. If you would like to sign up for a free trial of the EHedger research, please give us a call today at 866-433-4371, or simply sign up at www.ehedger.com/signup Have a great weekend!
USDA Report Average Analyst Estimates:
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