Much is riding on newest USDA report

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soybeans

Maybe the worst is over. Grain prices took a break last week on the Chicago Board of Trade, taking out support on the technicians’ charts.

But, after July corn futures hit a new recent low of $3.15 on June 25, losing seven cents, it rebounded June 29 to $3.26-1/2, closing at $3.24-3/4 for a gain of seven and three quarters cents. That is a rebound!

On June 30, we were up another four cents in early trading, at $3.30-1/4. These are cheap prices, but improving ones. The break came supposedly as new fears of an increase in COVID-19 cases shook the economy in general.

There is much discussion about how much the new cases are because of the so-called opening of the economy, and how much is because increased testing is finding more cases.

While the corn was bouncing back, the soybeans, which have been more positive, also gained prices. For July soybean futures, the recent low was May 6 at $8.41-3/4. We made a high of $8.80-1/2 on June 19 and then broke to $8.60 June 29. This was not much of a break, and we were trading at $8.65 June 30.

Encouraging

It is particularly encouraging that prices were higher going into USDA reports. USDA will report on crop acreage and grain stocks. Since the market has been at odds with USDA about crucial numbers, these reports are critical. It remains to be seen if prices are rallying as traders expect better numbers, or if the rally is just a bounce off bad news, and USDA numbers will not be supportive.

Ahead of the reports, we were told that the market expects corn acres to be reported at 95.2 million acres, significantly below the 96.99 million in the March report. The trade has a guess range from 97.1 million to 93 million acres. Grain stocks have pre-report estimates of 4.951 billion bushels, versus a range of 4.795 billion to 5.15 billion. Some who believe in lower current grain stocks point to low test weight issues from the late-planted crop that may now be becoming evident after months of feeding.

Soybean acres have a pre-report average estimate of 84.72 million acres and a stock of 1.392 billion. Traders’ range for acres is from 83.5 to 85.6 million acres, versus the USDA March estimate of 83.51 million. Traders’ grain stocks estimates range from 1.275 billion bushels to 1.49 billion.

Critical

So, this report is critical to keep our current price bounce going. These prices are disastrously low and could be lower under some conditions. Or, exports could improve, stocks could be lower than previously thought by USDA, and we could see better days ahead.

Many traders have long thought that we have spent the whole year struggling against incorrect USDA numbers. The thinking is that the crops last year were not nearly as good in yield or quality than has been assumed by the government. If that is true, it has to start turning up in the numbers from USDA.

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Marlin Clark is an associate of Russell Consulting Group, with a local office in Williamsfield, Ohio. Comments are welcome at 440-363-1803.

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