Report Causes Price Drop

Grains and oilseeds sold off in the wake of the June WASDE report.  December corn closed 13 ¼ cents lower at $5.37 ½, November soybeans down 12 ¾ cents at $13.14 ¼, and July wheat down 13 ¾ cents at $6.83.  The report had higher US crop carryout estimates than expected but since there was no change in acres we feel this was a rather neutral report.

The monthly supply and demand reports are still released during the middle of the trading session at 11:00am which means before you can even get a glimpse of the report verbiage, the high-frequency algorithms have already processed the report and are trading accordingly.  The main thing they picked up on was a higher corn carryout than what was listed in the Dow Jones and Reuters analyst polls.  This is why we got the instant, high-volume, market slam during the first 60 seconds of the release (see chart below).  The majority of news providers had a long time lag in releasing the WASDE headlines today due to the USDA’s inability to release this very time sensitive data in an orderly manner.  Our news vendor has recommended sending a letter to the USDA to request they change the report release time to allow the market to digest the information and create a more even playing field, we agree.

1 minute chart December Corn

On closer examination of the report (which we humans got to read 10 minutes late) showed the new crop corn carryout about 150 million bushels higher than the average analyst estimate but on unchanged corn acres.  The USDA did not change any acreage estimates from the May report and seem to be set on waiting for the June acreage report before estimating an acreage loss/swap. They did however compensate by lowering the national average corn yield by 1.5 bushels to 156.5 bpa.  The next acreage report will be released on June 28^th which means the July WASDE report will show production updated including the new acreage estimates.  The USDA lowered their "Feed and Residual" estimate from 5.325 billion bushels to 5.200.  This is still about 500 million bushels more than our estimate which is why we still have a negative outlook for corn prices going into harvest.  US old crop corn carryout was 10 million bushels higher than the average analyst estimate however they lowered world carryout by over 1.6 million metric tons from expectations.

There were no changes in either old crop or new crop soybean supply and demand estimates in the US.  They did lower the world carryout to 73.69 after lowering Brazilian beginning stocks.  Wheat was probably the most surprising since they lowered world ending stocks to 181.25 while most were guessing near 185.00.  Wheat still finished sharply lower from the increase in US production estimates.