USDA Paints Bearish Outlook -- As Expected

Overnight highlights: As of 6:15 a.m. CT, corn futures are fractionally to 3 cents higher, while soybeans and wheat are mixed. With price action mildly firming through the overnight hours, I expect grain and soy futures to favor a slighlty firmer tone on the open this morning. Cattle and hog futures are expected to open with a mixed tone this morning. * Bearish reaction to USDA reports. Corn and soybean futures were heavily pressured by USDA’s report data Friday, which featured record corn and soybean crop projections and more than a doubling of ending stocks for 2013-14. But it was the wheat market that had the sharpest reaction, as U.S. and global carryover projections for 2013-14 came in higher than expected, though the U.S. ending stocks projection is down from 2012-13. The report data paints a bearish long-term fundamental picture for corn and soybeans, though focus will now be on how the planting season progresses after a slow start. For wheat, traders’ reaction signals they put more stock in the global situation than the domestic picture -- at least for now. The long and short of it: Based on overnight price action, USDA’s report data is now “in” the market. Still, the bearish data will limit buying interest in grains unless there’s a strong bullish catalyst. * Reminder of corn planting delays this afternoon. There’s no doubt last week was the best planting week of the spring, but that’s not saying much. I expect corn planting progress to be in the mid-20% range this afternoon, which would still be well below the average pace. This week’s forecast calls for very warm conditions early in the week, followed by rain chances at the end of the work week and then more warm, dry conditions over the weekend. As soils dry (very slowly in some areas), planting progress will actively pick up. Interestingly, USDA’s 158-bu.-per-acre yield projection is 5.6 bu. per acre below trendline and is based on 60.5% of the crop being planted by May 15. That seems like a stretch at this point. The long and short of it: Because the forecast is warmer and drier, price support from this afternoon’s planting progress data is likely to be limited. * Another record Chinese corn crop forecast, but exports also seen rising. USDA projected China’s corn crop at 212 MMT and forecast Chinese corn imports of 7 MMT for 2013-14 in Friday’s Supply & Demand Report. State-run China National Grain and Oils Information Center forecasts a record corn crop of 214 MMT this year, which would be up 2.8% from the 2012 crop, and corn imports of 5 MMT, up 85.2% from 2.7 MMT in 2012-13. The long and short of it: Much like the U.S., China is experiencing corn planting delays in its key production region due to wetness. Despite the planting delays, record corn production is forecast this year in the U.S. and China, which leaves plenty of questions for the growing season.