Walsh Commercial Hedging 12/11/12
Dec 11, 2012
Even though the December WASDE report is usually a lay over until the January Final Production Report, the USDA monthly reports seem to always have some numbers in the balance sheets that leave traders scratching their heads. The one balance sheet that stood out was obviously in the wheat. The US all wheat carryout was increased to 754 million bushels vs. 704 in November and against trade estimates of 718. The 50 million bushel increase in the carryover was attributed to a cut of 50 million bushels for all wheat exports. World ending stocks came in at 176.95 million tonnes as compared with 174.2 million last month. The big surprise for wheat was that the USDA did not cut Argentine wheat production at all. I found this to be a surprise given the consistent rains for the past few months but they did manage to cut Argentine corn production. Also, they only cut Argentine corn production 500,000 MT to 27.50 million tonnes vs. trade estimates of 26.02. The USDA increased Australian wheat production 1 million tonnes in this report to 22 million tonnes after cutting it by 2 million tonnes in the November report to 21 million tonnes. Scratching your head yet? All in all, the wheat complex took a nose dive with the March Chicago contract finishing down 27 ¼ cents to $8.21 ½. This should make US wheat competitive in the world market now. The sharply lower trade in wheat spilled over into the corn and bean complex even though their reports were somewhat bullish. The USDA did not touch the US corn balance sheet at all leaving the carryover at 647 million bushels. Many in the trade thought the USDA would decrease exports like they did in wheat but they didn’t. The one surprise I found in corn was that they increased Chinese corn production 8 million tonnes to 208 million tonnes. Chinese corn is trading around $10/bushel so one would think they would have less corn, not more. March corn finished the day down a penny and a half at $7.28 and was obviously pressured by the sharply lower wheat trade. January beans shot up 13 ¾ to $14.87 ¾ right after the numbers came out but finished the day down 2 ¾ at $14.72. Ending stocks for beans were pegged at 130 million bushels vs. trade expectations of 135. There was a sale 115,000 MT of beans to China this morning but that had no effect on the market. The soybean crush was raised 10 million bushels to 1.57 billion bushels due to the strong foreign demand for soybean products. The meal complex was strong throughout the day with March meal ending up $3.20 at $443.20. With the December report out of the way, the trade will re-focus on South American weather and export demand until the January Final Report.
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