Will the USDA Shock and Awe on Friday?

Published on: 20:53PM Jan 07, 2020
small corn field

TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND MAY NOT BE SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES, KNOWLEDGE AND FINANCIAL RESOURCES.

 

Happy New Years everyone! Now that trade is getting back to normal, we are diving straight into what might be one of the most important USDA reports of the year. On January 10th the USDA will release the January WASDE, Quarterly Grain Stocks, Winter Wheat Seedings, and the 2019 Crop Production. In any year this report is a big deal, but after a very confusing growing season and questions about where all the corn is this year this report could be a big market mover.

Leading into this report I was worried that (like some of the summer reports) the trade expectations would be way too bullish and therefore set up a big disappointment for when the report was released. However, while the trade is looking for reductions in production for both corn and soybeans it seems that expectations have been tempered since mid-summer. For this report the average trade guess is looking for a modest reduction of about 150 million bushels in corn and 38 million bushels for soybeans.

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I do have a little concern about the trade expectations for ending stocks however. For corn the average trade guess is looking for a 153 million bushel reduction and for soybeans a 50 million bushel reduction. While expecting higher demand may be reasonable given the likelihood of a trade deal between the US and China it is very unusual for the USDA to raise or keep demand unchanged given a significant drop in production. Also, the USDA may not account for increased business with China before the deal is signed.

While the trade will be focused on the final production numbers for corn and soybeans there could be another number in this report that has the potential to steal the show, the Quarterly Grain Stocks number. Throughout fall and early winter the cash market has been relatively strong especially for corn. Many producers and end users have been scratching their heads as to why and where all the corn is. It is possible that maybe there isn't as much corn out there as we thought and if this is the case it should show up on Quarterly Grain stocks.

So, while the trade is expecting a bullish report on Friday the expectations might not be as wildly bullish as I had feared. It is certainly still possible that the report is bearish, but at least I feel like the average trade guesses accurately represent what the market currently has factored in. Now I feel like this report could go either way. But, either way there is likely to be some fireworks over the next two weeks.

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Give us a call if you would like more info on the strategies we are using or if you would like to set up an account to put a plan in action.  Ted Seifried - (312) 277-0113.  Also, feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.  Find me on twitter - @thetedspread 

March Corn Daily Chart:

March Corn

Producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!

Ted Seifried (312) 277-0113 or [email protected]

Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie

FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE-MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION'S STRIKE PRICE COMPARES TO THE UNDERLYING FUTURE'S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT, OPTION PRICES MAY ONLY MOVE A FRACTION OF THE PRICE MOVE IN THE UNDERLYING FUTURES. IN SOME CASES, THE OPTION MAY NOT MOVE AT ALL OR EVEN MOVE IN THE OPPOSITE DIRECTION.v