USDA supply and demand report produces one-day wonders

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By Marlin Clark

Tuesday, May 10, after my report for the week was written, U.S. Department of Agriculture gave markets a shot in the arm with its monthly Supply and Demand Report. As usual, the results in the market were based more on the spin than the actual numbers.

And, as usual, the report was mostly a one-day wonder.

It is encouraging that the markets are staying firm in the last week. We often see prices go up for a day and then crash after a report. In this case we got a dime bounce in corn and nearly 60 cents gain in soybeans, and the gains are mostly still in the market.

I have told callers that this is mostly a bean rally, and the numbers reflect that, except that corn has remained firm, even if prices below $4 are disappointing.

Soybean market

July soybeans had a range of 68 cents on last Tuesday, the 10th. After an early low, the report sparked big gains, and we held most of them to close up 57-1⁄2 cents at $10.84 after a high of $10.91-1⁄2.

That is a big day for anyone watching the markets for any reason! USDA helped the markets with a cut in the 2015-2016 carryout number.

Uncle Sugar now says we will have 400 million bushels of beans left at the end of the marketing year. That is down from 445 in the April report. It is just above the 395 that the trade put out as the average guess, but their guess was apparently not in the market yet, or we would not have rallied.

In other words, they weren’t actually trading their own numbers yet. Soybean prices have trailed off since then, but we are still trading 10.68-3⁄4 this Tuesday morning, May 17, which is a gain today so far of over four cents.

Corn future

The July corn futures were not as wild, but there is more follow-through. Prices were lower May 11 last week, after the report, but then we rallied for three days before a little breather this morning.

In the case of corn in the Supply and Demand report, the issue was surprise. There, the average guess for carryout was actually way above the report’s number. The trade was in for 2.253 billion bushels to be left over, but USDA came in at 1.803 billion.

Last month USDA was estimating 1.862 billion. So, the surprise was that instead of carryout increasing 391 million bushels, it was cut 59 million bushels.

That was a swing of 450 million bushels, and it spooked the market. July corn futures made a low of 368 before the report, probably on the market traders’ expectations.

With the reality of the report, we made a high of $3.86, and closed up 12 cents at $3.81. The pleasant surprise for the corn is that we have now traded $3.92-3⁄4 this morning, even though that is down one and a quarter cents.

Corn is firm, and at higher prices than we had the report day. If you are watching wheat, the numbers came in as expected, with little result. The trade estimated 980 million bushels for ending stocks, and USDA came in two million below that.

Wheat prices

July wheat futures were in the process of putting in a third cycle low at just about the same price as the last two, and the report did not change that.

The big factor in the wheat is the continued good weather in the Plains, although cool conditions the last couple of days has maybe helped prices higher.

The recent low was the day before the report, at $4.54-3⁄4 July futures. This is exactly two-thirds of a buck below the last high of 5.18-1⁄2 on April 21. The April 11th low was $4.53, and the March 2 low was $4.49-1⁄2.

We are now trading $4.75-1⁄4, which is up a half-cent for the day. This represents a nice bounce off the low, but does not signify any real bullishness.

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