What Producers Should Read Before the USDA Report
Feb 07, 2013
Weather??? The question is have we finally seen the last bullish South American weather card come out of the deck. I am not so sure we have seen the last one, but if I am counting cards, I have to believe South American weather related face-cards are becoming much more limited. If the bears start to feel that the deck is lacking many more bullish surprises we might start to see them aggressively up their wagers. Be careful, as the South American weather rally will have eventually ran its course. I am telling you now, once the bears feel somewhat comfortable with the overall "weather-risk" they are going to be quick to pounce. Producers should make certain a portion of your downside risk is protected, and that you are comfortable with the amount of early-sales you have booked. More than likely there won't be another "weather" story for a few months. This could give the bears a clear track and the ability to push the market lower for what could be an extended period of time. Just make certain you fully understand what type of downside pressure could come our way "IF" the South American weather story fizzles out.
USDA's monthly "Supply & Demand" report is due out tomorrow at 11:00am CST. The trade all of a sudden seems to be getting a little more nervous and concerned about what the USDA data may reveal. Most corn and wheat traders are now worried that the USDA could raise ending stocks on further cuts in demand. Soybean traders on the other hand are thinking ending stocks could shrink even further on increasing export and crush estimates. I included the "average" guesses that are currently circulating within the trade down below. Don't forget, I will not release Friday's report until after the USDA numbers come out. As you can imagine, the trade will be extremely quiet until the numbers are released.
Wheat got a little boost on rumors that Russia had recently purchased some US soft red winter wheat. There is also some talk that wheat gained a little support on the funds unwinding long corn and bean positions spread against short wheat contracts. There is also several forecasters calling for longer-term dry conditions over key wheat growing regions in the Central Plains and the western Midwest. Personally, I am not getting too excited over any of these bullish rumors. Put it this way, I am definitely not buying or re-owning any previous wheat sales on this news.
Brazil could run into a few additional logistical constraints if workers at state ports follow through with recent threats to go on strike. From what our sources are telling us, union representatives were scheduled to meet with legislators to persuade them to vote against parts of a bill that could threaten many port worker jobs. This is certainly something we need to keep our eye on moving forward, as the world simply can not afford Brazil to run into any type of additional logistical problems.
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