Grains ended mixed after the July WASDE, which provided a bullish surprise on corn.
Arlan Suderman with StoneX says the old crop and especially new crop ending stocks came in well below trade estimates.
“A little bit of creative accounting by USDA. It looked like they were trying to solve for a desired solution in keeping new crop stocks below 2.1 billion bushels,” he says.
The June 28 reports had quarterly stocks and acreage come in higher on corn than expected so USDA added the 1.4 additional acres which increased production but offset it through higher demand.
“So USDA increased feed usage rather than taking it down, they increased it by 75 million bushels for both this year and for next year, along with increased exports by 75 million bushels,” he states.
However, Suderman says isn’t likely to stop the bleeding in the corn market or get the funds to cover their record short position.
“The funds know farmer is the big long, holding big positions, probably has close to 3 billion bushels he has to move off the farm before this next harvest unless the crop really take a turn to the South. So they’re not worried about holding on to their short positions unless a legitimate weather problem develops,” he says.
USDA only made slight adjustments in ending stocks in the WASDE but did lower production by 15 million bushels and new crop ending stocks by 20 million bushels.
However, Suderman says USDA may be overly optimistic about demand with the current export pace.
“When you look at Chinese buying or any customer buying at this point. Normally we have 300 to 400 million bushels of new crop business on the books, we barely have 50 million bushels,” he says.
Wheat got a bearish surprise as production was raised 134 million bushels from the June report and well above expectations with higher yield and harvested acres.
Suderman says I think everyone was surprised with the higher figure.
“We all expected an increase in the size of the crop but not as big as what USDA did and so now the market need to find a way we can clear these prices,” he says.
He says this may give the funds even more ammunition to push the short side of the market unless there is a change in the Black Sea crop and exports.
“Russia right now is trying to drive prices lower to gut through the harvest when they need to move wheat out, but longer term whether they restrict exports is the key,” he adds.
The cattle market bounced on Friday still trying to recover from losses early in the week with softer cutouts and Southern cash business.
“Seasonally we tend to see the high behind us. We held on to the higher product market two to three weeks longer than what we would have anticipated that has started breaking now. Does that mean that’s the beginning of our seasonal trend lower? That is something we’ll be watching over the coming week or two,” he says.
However, he says it is likely intermediate highs are in unless the consumer demand outperforms.
