No, we didn’t forget to change the title of this week’s article. On Friday night the USDA continued it recent track record of sending shock waves through the market by slashing US corn yields well below market expectations. The market had barley recovered from the USDA finding a heap of corn stocks a week ago before its latest report foreshadowed that corn stocks would tighten much further than expectations.
This sent markets all limit-up last Friday night meaning that corn prices have traded in a range of 15% in the past week….wow….and this may be only the start. Wheat and soybean prices were also sent skywards on the news. Wheat prices spiraled higher to ensure wheat is kept out of feeding rations, while soybean prices moved higher to ensure they capture their fair share of Sth America plantings.
So what was the commotion? The USDA slashed US average corn yields by 5.4% from September. That’s the biggest September-to-October yield decline since1974! Since then, USDA has estimated lower-than-month-earlier corn yields in September and October just three times: 1993, 1995 and 2000. In each of those years, corn yields continued to trend lower: Down 8.7% from October in 1993; down 2.7% in 1995; and down 1.8% from October in 2000. The best-case scenario (down “just” 1.8% to the final) points the 2010 corn yield to 153bu/ac.
As a result, USDA’s projected ending stocks to use down to just 6.7%, the second lowest in history and down from a comfortable 13.1% last year and 13.9% the previous year. World coarse grain ending stocks were revised down to 14.5% stocks/usage - the second tightest set-up since 1973.
Friday’s report fired the first shots in the upcoming battle for plantings in the coming year. Corn, wheat and high protein wheat stocks have all tightened considerably in the past year and neither grain can afford to forfeit ground to the other.
Monday, October 11, 2010
Tuesday, October 5, 2010
USDA shocks markets again!
Grain markets were left reeling on Friday night after the USDA shocked the market by estimating corn stocks on hand more than 20% above expectations. Corn futures closed limit down on Friday night. This follows hot on the heels of the June report where the USDA reported stocks well below market expectations.
Remember the roughly 300 million bu. of corn stocks “lost” in the June Quarterly Grain Stocks Report? Well... apparently USDA was able to “find” those supplies. Sept. 1 corn stocks came in roughly 300 million bu. above the average pre-report trade guess and sets 2009-10 corn carryover at 1.708 billion bushels.
The market impact is that US corn stocks now move from being uncomfortably tight to a much more comfortable situation; 1.1 billion bu vs 1.4 billion bu. The tight corn stocks situation and the trend higher in corn values was underpinning the prices of other grains out of fear that too many acres would be lost to corn sowings unless the prices of other grains kept pace.
The best explanation many can offer is that the USDA’s counting has been thrown off by two unusual harvests in a row: the first when the harvest was wet and late, with poor quality, the second where the harvest is very early. Analysts think that some of this year’s early harvest has been counted (despite the USDA being adamant that no new crop stocks have been taken into account).
It will be very interesting to see which way the USDA jump in this week’s global S&D report. Most had been preparing for a bullish report, given that US corn yields continue to disappoint. But last week’s stocks report has thrown a spanner in the works.
Without support from corn, and with good late season rains falling across eastern Europe wheat futures followed corn lower. Canola also suffered heavy losses on the advancing harvest and increased farmer selling (of canola and US soybeans) and on a change in the weather pattern across Sth America. But with long-tern weather forecasts calling for lower than normal rainfall across the south American continent this summer, expect to here more talk about sth America in coming months.
The latest move lower could be a good opportunity for growers to close out hedges
Remember the roughly 300 million bu. of corn stocks “lost” in the June Quarterly Grain Stocks Report? Well... apparently USDA was able to “find” those supplies. Sept. 1 corn stocks came in roughly 300 million bu. above the average pre-report trade guess and sets 2009-10 corn carryover at 1.708 billion bushels.
The market impact is that US corn stocks now move from being uncomfortably tight to a much more comfortable situation; 1.1 billion bu vs 1.4 billion bu. The tight corn stocks situation and the trend higher in corn values was underpinning the prices of other grains out of fear that too many acres would be lost to corn sowings unless the prices of other grains kept pace.
The best explanation many can offer is that the USDA’s counting has been thrown off by two unusual harvests in a row: the first when the harvest was wet and late, with poor quality, the second where the harvest is very early. Analysts think that some of this year’s early harvest has been counted (despite the USDA being adamant that no new crop stocks have been taken into account).
It will be very interesting to see which way the USDA jump in this week’s global S&D report. Most had been preparing for a bullish report, given that US corn yields continue to disappoint. But last week’s stocks report has thrown a spanner in the works.
Without support from corn, and with good late season rains falling across eastern Europe wheat futures followed corn lower. Canola also suffered heavy losses on the advancing harvest and increased farmer selling (of canola and US soybeans) and on a change in the weather pattern across Sth America. But with long-tern weather forecasts calling for lower than normal rainfall across the south American continent this summer, expect to here more talk about sth America in coming months.
The latest move lower could be a good opportunity for growers to close out hedges
Subscribe to:
Posts (Atom)