Grains end lower after a disappointing WASDE.
John Heinberg, Total Farm Marketing says there was nothing for the bulls in the report as USDA failed to lower Brazil corn and soybean production. “Despite analysts estimates and even some of the private groups down in Argentina and Brazil having things significantly lower, it’s a pretty wide spread between what the USDA is saying, and those groups are saying. I think some of it comes down to questions about planted acres or area down there.”
He says USDA is slow playing making any cuts because the last two years they’ve ended up having to raise South American and specifically Brazilian production after making cuts and they don’t want to do that again.
Heinberg thinks the market is somewhat discounting that big spread with the idea the USDA will come more in line down the road. However, when does that happen? Right now, Conab’s Brazil corn estimate is 13 million metric tons lower than USDA’s estimate.
He says, “As we closer to the harvest window and start to see what kind of crop is coming out of Brazil, USDA will likely have to bring their numbers down.”
U.S. ending stocks were also disappointing as USDA increased soybean ending stocks 25 million bushels with a drop in exports. For wheat they also increased carryover 25 million bushels through lower feed demand. Corn ending stocks were lowered by 50 million bushels with better demand for ethanol and feed, but the trade was expecting a larger cut.
Heinberg says poor weekly export also weighed on the grains with a marketing year low in corn.
So, corn and soybeans did technical damage during the session. Corn took out major moving averages and soybeans scored a new low for the move in the process. That opens the door for more fund selling pressure says Heinberg. “They have no reason to get out of their short positions and so the path of least resistance may be down.”
